Have you and your relatives fought each other over ancestral homes and inheritance? I am raising an uncomfortable question, I know.
China’s billionaire families have certainly had their share of very public and very ugly spats — including the recent battle of “Wahaha princess” Zong Fuli (宗馥莉), also known as Kelly Zong, with her half-siblings for control of more than US$2 billion of cash held offshore. However, as Chinese society ages and the economy slows, the middle class is starting to argue over money as well, tearing apart long-held social norms such as family harmony and filial duty.
By 2023, China already had 217 million people aged 65 or older, or about 14 percent of the population. Over the next two decades, siblings and distant relatives would be tussling over family assets.
In some parts of China, retirees are the richest. An estimated 20 million former civil servants receive a monthly pension of more than 6,200 yuan (US$870), more than what most fresh college graduates are making. However, the bulk of their wealth is in real estate. For long-time residents in cities such as Shanghai and Beijing, their homes — even dilapidated ones — probably have tripled in value in the past two decades.
On the other hand, Gen X and millennials are struggling. Agism is a huge issue in China. As tech companies downsize, mid-career professionals, even those as young as 35, are being hit the hardest. Some also worry that their teenagers are becoming “professional children,” returning home after college and taking gap years indefinitely. Some financial windfall would be nice.
Already, social perception is changing. According to the latest annual survey from Dajia Insurance Group, more than half of Chinese people doubt their children would care for them financially, and only 10 percent strongly agree with the traditional notion of filial piety. However, most retirees still crave close emotional connections with their families.
However, can relatives undergo intergenerational wealth transfers without hurting each other’s feelings? Unfortunately, splitting an elderly person’s wealth often means selling real-estate portfolios, and in some cases, deciding whether to move to a nursing home.
Chinese live longer these days. Participants in the Dajia survey on average expect to reach the age of 84, with 21 percent eyeing 90 and beyond.
Uncomfortable real-life situations are being played out in my hometown Shanghai, which has an acute aging issue — more than one-third of the population is older than 60. A friend complained recently that an aunt living with her grandparents believed she deserved the entire property, because she cared for them. As for me, I am emotionally attached to our ancestral home, resisting pressure from more cash-strapped relatives to offload into China’s prolonged property downturn.
There are much sadder tales. A childhood classmate got power of attorney from her mother — who has Alzheimer’s disease — sold her house and moved her to a community hospital. She is investing in her two teenage sons’ education instead.
I do wonder if this social tension can be lessened if China allows more financial products. In the US, for instance, an elderly person can take out a reverse mortgage that converts a portion of home equity into cash. Often, the loan does not need to be repaid until a maturity event, which typically occurs with outright sales or death. The retiree can still live at home, maintain a certain lifestyle, and gift some money to children in need. It is a graceful solution.
Chinese society is getting old before it gets rich. If the economy was still growing at 10 percent a year, an old apartment in the city center would not have the capacity to change family dynamics. Unfortunately, they are the most coveted assets now.
Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. A former investment banker, she was a markets reporter for Barron’s. She is a CFA charterholder. This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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