Last updated: 23:14 / Sunday, 10 July 2016
Up to 9.4% in 2020

Wealthy Chinese are Looking to Increase Their Overseas Allocation

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Wealthy Chinese are Looking to Increase Their Overseas Allocation
  • Chinese HNWIs investable financial assets will account for 51% of China’s individual wealth in 2020
  • China will become one of the world's largest markets of HNWIs
  • Private banking institutions manage less than 20% of the wealth of Chinese HNWIs

According to a report from China Industrial Bank (CIB) and The Boston Consulting Group (BCG) on Chinese private banking development in 2016, despite the slowing Chinese economic growth, the wealth of high net worth individuals (HNWIs) is rising steadily. It is estimated that China's high net worth families will reach 3.88 million by 2020 and their investable financial assets will then account for 51% of China’s individual wealth, offering great opportunities for the development of private banking business.

The report, called 2016 China Wealth Report: Growing Against the Trend with Global Asset Allocation notes that as the Chinese economy continues to open, the demand of HNWIs for global asset allocation will increase significantly. It is estimated that the proportion of Chinese individual assets to be allocated overseas will increase from the current 4.8% to about 9.4% in the next 5 years. And that from 2015 to 2020, HNWIs' investable financial assets will increase at an average annual rate of 15%, significantly higher than the projected GDP growth rate of 6.5% over the same period.

Chen Jinguang, CIB Vice President, is optimistic about the prospect of China’s private banking, saying, “It is estimated that China's high net worth families will reach 3.88 million by 2020 and their investable financial assets will then account for 51% of China’s individual wealth, offering great opportunities for the development of private banking business. However, at the same time, we should recognize the undersupply of private banking services. At present, China's private banking institutions manage less than 20% of the wealth of high net worth families, which implies huge opportunities for development. Moreover, in recent years, the banking industry has been accelerated its transformation, focusing on developing capital-light businesses. During this process, private banking business will face unprecedented development opportunities by taking advantage of connecting investment asset and private wealth.

According to their survey, about 30% of HNWIs have invested overseas, and 56% have not yet but say they will consider overseas investment in the next three years. "As the most dynamic participants in China's economy, HNWIs are leaders in bringing China in line with the international norms. China’s continuous economic globalization will drive the HNWIs to shift from domestic wealth allocation to global wealth allocation."

The survey points out that, against the background of Chinese economic globalization, RMB exchange rate volatility and declining domestic return on assets, the drivers for overseas investment of HNWIs will be more diversified. The change of drivers will create more business opportunities for Chinese Private Banks: the number of customers seeking overseas investments will expand, including not just ultra-high net worth individuals (UHNWIs) but also HNWIs; the shift from real estate to financial assets will increase demand for wealth management services; and the shift from overseas-oriented one-way flow to domestic-overseas two-way flow will help expand Chinese institutions’ operations into foreign markets.

 

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