The Rise of China’s Rich - Private Banking in China, Episode I

Despite the current global economic crisis due to COVID-19, China has been slowly recovering its economy. China’s wealth market and high-net-worth individuals (HNWIs) have been steadily growing since the last decade. The gigantic market size and growth potential remain attractive to foreign investors. The new rules also allow foreign investors to enter the market easier. In terms of the healthcare industry, the rising wealth of Chinese individuals would potentially signal an increase in lifestyle diseases. The healthcare market would expect to expand rapidly.


Analysts from Bridge Point Capital performed a thorough analysis of China’s private wealth market through an in-depth understanding of the Asia market to discuss the changes in the country’s wealth market, HNWIs behaviors, and future private banking competitions and future implications.

Figure 1, Wealth Growth by Country, 2007-2017, New World Health [1]

In 2019, China’s GDP reached almost $14.98 trillion dollars, according to the National Bureau of Statistics of China. The GDP per capita is expected to reach $12,000 in 2022, joining the ranks of high-income economies according to the wealth market white papers published in 2019 [1]. From 2007 to 2017, the total private wealth has increased by almost 200% being the fastest-growing and best-performing wealth market in the world (see Figure 1, New World Health [1]) [1].


Figure 2, Total Investable Assets Held by Chinese Individuals, 2008-2019, Bain [2]

The total investable assets are expected to reach $30 trillion dollars by the end of 2019 [2]. With the new domestic regulations imposed on the market, the growth slowed since 2018. In 2019, the economy stabilized with the focus on the “six stabilities” (employment, finance, foreign trade, foreign investment, domestic investment) and economic expectations [2]. The growth of wealth management products and domestic investments has slowed due to the new regulations, causing an increase in cash and deposits in assets portfolios (see Figure 2, Bain [2]).


Figure 3, Regional distribution of Chinese HNWIs, 2018, Bain [2]

The demographic and geographical distribution for HNWIs has been diversified with eleven areas having more than 50,000 HNWIs each, and six having more than 100,000 HNWIs each (see Figure 3, Bain [2]) [2,3]. The top five HNWIs provinces are more sensitive to market fluctuations and the growth of HNWIs has slowed significantly. The total number of HNWIs is ranked second in the world after the U.S., reaching about 1.67 million. Entrepreneurs remain the dominant forces among the HNWIs. An increased influx of highly trained and specialized professionals are also joining the ranks. HNWIs have become more conservative and risk-averse. They are more mature at wealth allocation and demand more sophisticated and personalized wealth management products. More than 50% of HNWIs value wealth management institutions’ credibility and brand image.


That being said, after the establishment of the new regulation in 2018, the financial leverage is lowered as a result. Many wealth management institutions were slightly adversely impacted due to policy changes. The HNWIs are starting to focus on risk management and securing assets. Looking ahead, private wealth management and financial services will continue to mature and evolve sustainably.


In the upcoming episodes, we will be covering from various performance assets to understand the current wealth market condition in China; HNWIs’ behaviors and mentality to fit market needs; financial institution competitions and future outlook to improve strategies and business performance. If you are interested in more of China’s private wealth trends and key insights, please sign up for our newsletter or follow us on WeChat.



References:

China Private Banking Industry Whitepapers (2019). 中国私人银行发展报告(2019)- 暨中国家族财富管理与传承白皮书

CMB & Bain & Company: https://www.bain.com/globalassets/noindex/2019/bain_report_china_private_wealth_report_2019.pdf

BCG: https://image-src.bcg.com/Images/china-wealth-2019-cn_tcm55-217778.pdf