China’s powerhouse economy has long been known as the factory of the world. But as well as churning out smart phones and other shiny gadgets and consumables, it has also come to lead the world in the production of billionaires.

Three years ago China overtook the United States as home to the largest number of dollar billionaires – and the gap is growing fast. The 2018 Hurun Global Rich list released in February put China on 819 billionaires, up by 210 from a year earlier, compared to 571 in the US.

In Western economies, ranks of the super-rich tend to include large numbers of trust fund princelings and aristocrats whose wealth can be traced back over generations. In China, however, almost all are self-made entrepreneurs.

Self-made, entrepreneur billionaires make significant contributions to the economic growth of their home countries, bringing innovations to markets as they grow their business.

Some, like Alibaba founder Jack Ma, have a reputation for flaunting their ‘Crazy Rich’ status on fast cars, private jets, sprawling mansions and lavish parties.

Yet among this growing cohort of high-rollers, many face a surprising problem. In a recent research study at the National University of Singapore (NUS) Business School we found lack of access to cash to be one of the top factors determining billionaire failure.


To study the survivability of China’s billionaire entrepreneurs we worked with colleagues at two Chinese universities to examine the data in two main trackers of China’s super-rich: the annual Hurun Report rich list and a similar list compiled each year by Forbes.

A distinct feature of these lists with regard to China is the extremely high degree of volatility they reveal, with a much larger proportion of names rising and falling off the list every year than in similar rankings for other economies.

Indeed, while the number of billionaires in China has boomed in recent years, our examination of the annual rich lists showed that barely a third (35.4%) of the billionaires who made it onto the list  managed to remain on it. Moreover, of those that dropped off the lists, very few managed to re-enter.

Whilst few of us non-super rich might feel the need to shed tears for former billionaires, there are important implications to this.

In China as elsewhere, self-made, entrepreneur billionaires make significant contributions to the economic growth of their home countries, bringing innovations to markets as they grow their business. As a result, a large failure rate creates ripples in the form of economic uncertainty and turbulence. This can cause widespread damage, affecting employees, suppliers, local communities and economies in general.

So what accounts for the high turnover of China’s billionaire entrepreneurs, and specifically why do so many of them seem to fail?

Social connections

In our study we looked at several factors that account for billionaire longevity, including institutions governing property rights and access to finance, political connections and access to social networks, and personal characteristics including gender and educational background.

For our study we focused solely on first generation, self -made entrepreneurs. This meant we removed from consideration the relatively few Chinese billionaires who had inherited money from billionaire parents or who had earned their wealth from the privatisation of state owned firms.

Among the findings we uncovered was that social connections played no significant role in the longevity of billionaires. This may be surprising given China’s deeply entrenched “guanxi” business culture, which traditionally places a heavy emphasis on the importance of personal relationships.

At an individual level we found that billionaires with an MBA were less likely to fail, as were older, male billionaires. But there was no evidence that undergraduate educational levels played a role in determining longevity, nor did having an EMBA education.

Above all though we found that two of the most influential factors determining longevity were access to finance and access to political connections.

Access to finance is typically seen as an issue facing small scale entrepreneurs, so it is surprising to see it also being a major challenge for billionaires who – one might typically be assume – would have little shortage of funds.

As for political connections, our study found that it could often act as a double edged sword, with strong influence both positively and negatively on billionaire longevity. We found that having ties to influential officials played a strong role, perhaps helping business owners win government contracts or helping to shield their business from expropriation by the government.

However losing these connections – which in China is often inevitable – can also be a key cause of billionaire failure. For example, the downfall of important government officials may implicate business owners with whom they had connections.

Many studies on entrepreneurship have tended to emphasize the importance of strong institutions governing property rights and contracting as being important determinants of long-term success. Property rights cover such issues as regulatory transparency and fairness, government corruption and interference in business, while contracting measures factors such judicial fairness and the protection of business rights, as well protection of intellectual property among others.

However, whilst these issues may affect small entrepreneurs, we found no evidence that either strong property rights or contracting institutions mattered in affecting the longevity of Chinese billionaires.

Our study sheds light on the volatility beneath the surface of China’s fast-growing economy and how it impacts some of its most economically-significant individuals.

Overall, it shows that for China’s super-rich, the greatest threat to the continuation of their status can be a crippling lack of access to cash. In large part this comes down to an increasingly tough funding climate for private firms, with China’s overwhelmingly state-owned banks tightening their access to credit and placing greater restrictions on what it can be used for.

For China’s policymakers seeking to promote the sustained growth of billionaire entrepreneurship, this suggest that policies that reduce discrimination against private entrepreneurs in access to finance will likely be more effective than those that enhance property rights and contracting institutions.