A great wealth transfer is happening in China

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Have you and your relatives fought 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 "Wahaha princess" Kelly Zong's recent battle with her half-siblings for control over $2 billion of cash held offshore. But 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 and over, or about 14% of the population. Over the next two decades, siblings and distant relatives will 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 over 6,200 yuan ($872), more than what most fresh college graduates are making. But 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 last two decades.

On the other hand, Gen X and millennials are struggling. Ageism 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, over half doubt their children will care for them financially, and only 10% strongly agree with the traditional notion of filial piety. Most retirees still crave close emotional connections with their families, however.

But can relatives undergo inter-generational 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% eyeing 90 and beyond.

Uncomfortable real-life situations are being played out in my hometown Shanghai, which has an acute aging issue — more than a third of the population is over the age of 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 suffers from Alzheimer's disease, sold her flat and moved her to a community hospital. She's 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 U.S., for instance, a senior citizen can take out a reverse mortgage that converts a portion of home equity into cash. Often, the loan doesn't 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's a graceful solution.

Chinese society is getting old before it gets rich. If the economy was still growing at 10% 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.

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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.

(COMMENT, BELOW)

Previously:
• 02/13/25: China's Mr. Big has squandered his most powerful trade war weapon