In the year of COVID-19, the well-heeled are optimistic but more cautious

For the first time in her life, Jane Fan, 39, realizes the importance of risk in personal finances.

An elite businesswoman who now works for a state-owned auto company in Shanghai, Fan has earned an enviable salary since her graduation from university. Over the years, she has worried about making a success of marriage and being a good parent, while money management just didn’t enter her thoughts.

All that changed this year.

“This year is so different,” Fan said. “I had my first-ever salary cut due to the COVID-19 pandemic that hit many industries, including autos.”

She added, “So far, my salary cut wasn’t big enough to affect my quality of life ... but I do feel a bit uncomfortable coming to grips with that fact.”

For many Chinese people living in an era of stable economic growth, realizing that wealth can be lost as well as accrued is a bitter pill to swallow. Rapid pandemic control in China has eased anxieties, but many who do enjoy very comfortable lifestyles are keeping a wary eye out.

A recent survey by the Shanghai Advanced Institute of Finance and investment firm Charles Schwab showed general confidence among the relatively affluent remains positive.

Their China Rising Affluent Financial Well-Being Index tracks perceptions, including confidence, planning, management and engagement of people who are driving China’s economic future.

The 2020 index, which encompasses an August survey of 4,032 people across the country, rose to 69.73 from 65.96 a year ago, despite the pandemic.

An index above 50 indicates a positive state of confidence.

“Overall, Chinese people are positive,” said Lisa Hunt, executive vice president of International Services and Business Initiatives at Charles Schwab & Co Inc.

“That is good news for the domestic economy as the country bets on consumer spending to support growth at a time when external demand is so full of uncertainties,” she said.

According to the survey report, more people now realize the importance of financial planning, with respondents reporting a personal financial plan rising 8.8 percentage points. It also found that people seem to have better understanding of what their financial plans should include.

Take Fan as an example. In March, she bought some health-care-related stocks and also invested in gold as a hedge against the risk of weakened currencies. Her investment choices proved wise; they made up for her salary cut. However, the value of those investments has scaled back in recent months.

“I don’t feel sad that I didn’t sell them at the height of their value,” said Fan. “I am not out to earn more money. I just want to protect the wealth I have.”

The survey also showed that more affluent people prefer to hold cash and other low-risk investments, while real estate has become less popular because it is more cumbersome to add to a portfolio and harder to liquidate quickly.

Another impact of the COVID-19 pandemic, the survey found, is that the concept of wealth has new shades of meanings beyond money. People are now putting value on the spiritual and the familial over material possessions.

Family health ranked 40.2 percent in the survey, followed by personal health at 36.5 percent and happiness at 35.7 percent. Within the top 10 priorities of rising affluent priorities, a stable income was the sole tangible druthers.

This year’s survey also noted the role that convenient digital access to financial products is playing in personal wealth management, though it warned against misleading information often presented on social media.

Wu Fei, a professor at the Shanghai Advanced Institute of Finance, said positive sentiment among the well-heeled is good news for the global economy as well because businesses need evidence to convince them of recovery.

However, businesses need to beware. People like Fan are becoming more selective consumers, spending only on what they really need.

“I have cut spending on things like clothes, cosmetics and entertainment,” Fan said. “But I have bought myself a gym member card, and I will do more cooking at home to keep my family’s diet healthy.”