China Wealth Report 2015

The Chinese economy and banking systems have been revolutionized since the turn of the 1980s, when the country started to implement large scale projects to compete on the world stage. The country has adapted to market movements and innovation, although the Chinese leadership still retains control of financial services.

The implementation of Basel III in January 2014 further increased levels of transparency in China in comparison to previous years. This, in addition to China’s entry into the World Trade Organization (WTO) in 2001, has significantly opened up opportunities for foreign banks to invest in the country.

However, the Chinese economy has been plagued by a shadow banking system which continues to expand, creating problems that cannot be dealt with by the mainstream banking system. Although transparency has increased, it is still low compared to many banking sectors in Europe and the Americas. The Chinese government has yet to effectively combat this. Their provision of additional capital for struggling banks is causing inefficiencies in the market.

The Chinese private banking industry is currently in a stage of development, with the country looking to reduce its reliance on the domestic banking sector and reach out to overseas private banks. The country is also aiming to focus on quality growth in order for it to become independent of government capital, while private banks aim to focus on client service rather than brand image. With China being such a large market, many foreign private banks have targeted involvement in local markets.

The Chinese government, unlike many capitalist countries, aims to have a decisive influence over Chinese banking matters. Government intervention could influence products in the market and reduce levels of overseas investment. This is evident from the 1.73% share that foreign private banks have in the country, according to figures from the Chinese Banking Regulatory Commission in 2013.

Developments in regulation have also changed the way both domestic and foreign banks work in China. The Basel III and FATCA regulations that have already been bought into place are increasing overall efficiency in the market. This also benefits Chinese private banks; with no financial institutions threatened with blacklisting as part of the inter-governmental agreement.

These steps demonstrate that the Chinese private banking industry is in a positive position and ahead of the world in terms of regulation. Higher levels of regulation such as Basel III will also create a quality-based financial system, which in turn will be made more competitive by the high-quality foreign private banks currently in the market.

China will also benefit from becoming the largest economy in the world in the foreseeable future. The HSBC 2050 report suggests that it will move up to first place by 2050. This will make it a prime location for the management of HNWI wealth and also a prime location for private banks to appeal to the new high levels of wealth that will be created. To achieve this, China needs to open up to greater foreign investment which will, as a result, alleviate the pressure on the current political elite whilst also providing a higher quality of client service in the market.

Scope

• Independent market sizing of the Chinese HNWIs across five wealth bands

• HNWI volume, wealth and allocation trends from 2010 to 2014

• HNWI volume, wealth and allocation forecasts to 2019

• HNWI and UHNWI asset allocations across 13 asset classes

• Geographical breakdown of all foreign assets

• Alternative breakdown of liquid vs. investable assets

• Number of UHNWIs in major cities

• Number of wealth managers in each city

• City ratings of wealth management saturation and potential

• Details of the development, challenges and opportunities of the Wealth Management and Private Banking sector in China.

• Size of China's wealth management industry

• Largest private banks by AuM

• Detailed wealth management and family office information

• Insights into the drivers of HNWI wealth

Key Highlights

What is the total number of HNWIs in China? How much wealth in US$ trillion do they currently hold?

What is the average total of wealth held by each HNWI in US$ million?

What has been the percentage increases in Chinese HNWI numbers in the last two years?

How substantial is the forecast growth in the number of Chinese HNWIs by 2019? By what percentage is HNWI wealth expected to grow in the same forecast period?

How much will this be in total in US$ trillions?

How much of their wealth do Chinese HNWIs hold outside their home country? How does this compare to the global average?

Reasons to buy

• Investigate a comprehensive analysis of the private banking and wealth management sector in China and deliver your strategy to clients based on the most current market information

• Evaluate HNWI numbers and volumes in each major Chinese city to target prospects precisely and ensure the cost efficiency of your operations.

• Assess the proliferation of family offices in the Chinese wealth market to identify where the competitive balance offers you the best chance to implement your expansion strategy.

• Gain an understanding of the competitive landscape of the Chinese wealth management market to identify the key regulations and cultural variations that might potentially have negative repercussions for your competitive edge.

• Investigate the five wealth bands detailed in the report to identify the preferences for wealth management services in each of these respective segments. Establish where your opportunities are in the market whilst minimising your exposure to risk.

Companies mentioned

China Merchant Bank Co. Ltd

Agricultural Bank of China Ltd

Bank of China Ltd

Bank of Communications Co. Ltd

China CITIC Bank Corp. Ltd

China Construction Bank Corp.

China Minsheng Banking Corp.

Industrial and Commercial Bank of China Ltd

Industrial Bank Co. Ltd

Shanghai Pudong Development Bank Co. Ltd

Table of Contents

1 Introduction

1.1 Details of this Report

1.2 Definitions

2 Executive Summary

3 Wealth Sector Fundamentals

3.1 Political Background

3.2 Economic Background

3.3 Social Background

3.4 Benchmarking Chinese Wealth in Context

3.4.1 Distribution of wealth in China

3.5 HNWI Volume and Wealth Trends

4 Findings from the WealthInsight HNWI Database

4.1 Trends in HNWI Wealth to 2019

4.1.1 HNWI trend analysis

4.1.2 Wealth band trends

4.1.3 Demographic breakdown of HNWIs

4.1.4 HNWIs – job titles

4.1.5 HNWIs – industry breakdown

4.1.6 HNWIs – industry performance

4.1.7 HNWIs – breakdown by city

4.1.8 HNWIs – city performance

4.1.9 HNWIs – city population densities

4.1.10 HNWIs – city forecasts

4.2 UHNWIs

4.2.1 UHNWI volume trend analysis

4.2.2 UHNWI wealth trend analysis

4.2.3 Demographic breakdown of UHNWIs

4.2.4 UHNWIs – industry breakdown

4.2.5 UHNWIs – city breakdown and performance

4.3 UHNWIs – Billionaires

4.3.1 Billionaire volume trend analysis

4.3.2 Billionaire wealth trend analysis

4.3.3 Billionaire per capita net worth trend analysis

4.3.4 List of billionaires

4.4 UHNWIs – Centimillionaires

4.4.1 Centimillionaire volume trend analysis

4.4.2 Centimillionaire wealth trend analysis

4.4.3 Centimillionaire per capita net worth trend analysis

4.5 UHNWIs – Affluent Millionaires

4.5.1 Affluent millionaire volume trend analysis

4.5.2 Affluent millionaire wealth trend analysis

4.5.3 Affluent millionaire per capita net worth trend analysis

4.6 Core HNWIs

4.6.1 Core HNWI volume trend analysis

4.7 Core HNWIs – Mid-Tier Millionaires

4.7.1 Mid-tier millionaire volume trend analysis

4.7.2 Mid-tier millionaire wealth trend analysis

4.7.3 Mid-tier millionaire per capita net worth trend analysis

4.8 Core HNWIs – Lower-Tier Millionaires

4.8.1 Lower-tier millionaire volume trend analysis

4.8.2 Lower-tier millionaire wealth trend analysis

4.8.3 Lower-tier millionaire per capita net worth trend analysis

5 Analysis of Chinese HNWI Investments

5.1 Analysis by Asset Class

5.1.1 Trends in alternative assets

5.1.2 Trends in ‘art, wine and wheels’

5.1.3 Trends of investments in real estate

5.1.4 Trends of investments in cash and deposits

5.1.5 Trends of investments in fixed-income

5.1.6 Investment trends in equity

5.1.7 Investments trends in business interests

5.2 Analysis of Foreign Investments

5.2.1 Investments in Europe

5.2.2 Investments in North America (including the US, Mexico and the Caribbean)

5.2.3 Investments in the Asia-Pacific

5.2.4 Investments in South America

5.2.5 Investments in the Middle East

5.2.6 Investments in Africa

5.3 Alternative Breakdown: Liquid vs Investable Assets

5.4 Analysis of Chinese UHNWI Investments

6 Competitive Landscape of the Wealth Sector

6.1 Competitive Landscape

6.1.1 Domestic private banks

6.1.2 Foreign private banks

6.1.3 Wealth managers

6.1.4 Family offices

6.1.5 Financial advisors

6.2 Developments in the Chinese Private Banking Industry

6.3 Wealth Management and the Private Banking Industry

6.4 Chinese Wealth Management Industry – Clientele Model and Maturity

6.5 Behavioral Mapping of Wealth Management and Private Banking in China

6.6 Porter’s Five Force Analysis – the Wealth Management Industry

7 Appendix

7.1 Additional Components of the Wealth Sector in China

7.1.1 Philanthropy

7.2 Tax Regulations

7.3 Regulations Related to Immigration, Investment and Employment

7.4 Key Drivers

7.4.1 CNY to US$ exchange rate

7.4.2 Real GDP growth

7.4.3 Per capita GDP

7.4.4 Domestic market capitalization

7.4.5 Commodity index

7.4.6 Foreign direct investments – inflow and outflow

7.4.7 Inflation rate

7.4.8 Interest rate

7.4.9 Balance of payments

7.4.10 Government debt

7.4.11 Stock market performance

7.5 Wealth Breakdowns

8 About WealthInsight

List of Tables

Table 1: HNWI Wealth Band and Group Definitions

Table 2: Regions in China by Population (Volume), 2014

Table 3: Chinese HNWIs – Volume Distribution (%), 2014

Table 4: Chinese HNWIs – Wealth Distribution Wealth Pyramid (%), 2014

Table 5: Chinese HNWIs – Industry Performance, 2010–2014

Table 6: Chinese HNWIs – Cities, 2014

Table 7: Chinese HNWI Growth in Top Cities (Thousand), 2010–2014

Table 8: Chinese HNWI Population Density in Major Cities (Thousand), 2014

Table 9: Chinese HNWIs in Top Cities (Thousand), 2010–2019

Table 10: Chinese HNWIs – Growth Rates for Top Cities (%), 2010–2019

Table 11: Chinese UHNWI Gender Performance (%), 2010–2014

Table 12: Chinese UHNWI Source of Wealth (%), 2014

Table 13: Chinese Volume of UHNWI in Top Cities (Hundred), 2010–2019

Table 14: Chinese UHNWI Growth Rates in Top Cities (%), 2010–2019

Table 15: Chinese Billionaires Market Overview (Volume and US$ Billion), 2010–2019

Table 16: Chinese Top 10 Billionaires (US$ Billions), 2014

Table 17: Chinese Billionaire Wealth Growth (US$ Billion), 2010−2014

Table 18: Chinese Centimillionaires Market Overview (Volume and US$ Million/Billion), 2010–2019

Table 19: Chinese Affluent Millionaires Market Overview (Volume and US$ Million/Billion), 2010–2019

Table 20: Chinese Mid-Tier Millionaires Market Overview (Volume and US$ Million/Billion), 2010–2019

Table 21: Chinese Lower-Tier Millionaires Market Overview (Volume and US$ Million/Billion), 2010–2019

Table 22: Chinese Allocations of HNWI Assets (%), 2010–2019

Table 23: Chinese HNWI Holdings Growth (%), 2010–2019

Table 24: Chinese HNWI Alternative Asset Composition (%), 2010–2019

Table 25: Chinese HNWI Trends of Investments in Alternative Assets (%), 2010–2019

Table 26: Chinese Trends in ‘Art, Wine and Wheels’, 2010–2014

Table 27: Global Prime Real Estate Prices per m2 (US$), 2012

Table 28: Chinese HNWI Foreign Investment Allocations (%), 2010–2019

Table 29: Chinese HNWI Liquidity Breakdown (US$ Billion), 2010–2019

Table 30: Chinese HNWI Liquidity Breakdown (%), 2010–2019

Table 31: Chinese UHNWI Allocations and Share of HNWI Assets (%), 2014

Table 32: Leading Domestic Private Banks in China by local AuM (US$ Million), 2014

Table 33: Leading Foreign Private Banks in China by local AuM (US$ Million), 2014

Table 34: Leading Wealth Managers in China by AuM (US$m), 2014

Table 35: Wealth Management Industry – Recent Deal Activity in China, 2014/2014

Table 36: Chinese Income Tax Bands (RM), 2014–2014

Table 37: CNY per US$ Exchange Rate, 2010–2019

Table 38: Chinese Real GDP Growth (%), 2010–2019

Table 39: Chinese GDP per Capita (US$), 2010–2019

Table 40: Chinese Domestic Market Capitalization (US$ Billion), 2010–2014

Table 41: Chinese Commodity Indices, 2010–2019

Table 42: Chinese Foreign Direct Investment (US$ Billion), 2007–2011

Table 43: Chinese Inflation Rate (%), 2010–2019

Table 44: Chinese Money Market Rate (%), 2010–2019

Table 45: Chinese Balance of Payments (US$ Billion), 2010–2014

Table 46: Chinese Government Debt as a Percentage of GDP, 2010–2019

Table 47: Chinese Stock Market Performance, 2010–2014

Table 48: Chinese HNWI Wealth vs GDP Ratio, 2010–2019

Table 49: China – Appendix One

Table 50: China – Appendix Two

List of Figures

LIST OF FIGURES

Figure 1: HNWI Wealth Band Definitions

Figure 2: Map of China

Figure 3: Chinese Asset Price Performance (%), 2010–2014

Figure 4: Chinese HNWI Performance (US$ Billions and HNWI Volume), 2010–2019

Figure 5: Chinese vs Global HNWIs (%), 2010–2019

Figure 6: Chinese HNWIs – Growth Factor Correlation, 2010–2014

Figure 7: Chinese HNWIs – Wealth Pyramid (Volume Distribution), 2014

Figure 8: Chinese HNWIs – Wealth Pyramid (Volume Distribution), 2014

Figure 9: Chinese HNWIs – Age Distribution (%), 2014

Figure 10: Chinese HNWIs – Job Titles (%), 2010–2014

Figure 11: Chinese HNWIs – Distribution by Industry (%), 2014

Figure 12: Chinese HNWIs – City Performance (%), 2010–2014

Figure 13: Chinese HNWIs – Volume of HNWIs by City (Thousand), 2010 and 2014

Figure 14: Chinese HNWIs – City Forecasts (%), 2014–2019

Figure 15: Chinese Volume of HNWI by City (Thousand), 2014–2019

Figure 16: Chinese UHNWI Wealth Share vs Volume Growth (%), 2010–2014

Figure 17: Chinese UHNWI Volume by Wealth Band (Thousand), 2010–2019

Figure 18: Chinese UHNWI Wealth by Wealth Band (US$ Billion), 2010–2019

Figure 19: Chinese UHNWI Age Distribution (Percentage Share), 2014

Figure 20: Chinese UHNWI Distribution by Industry (%), 2014

Figure 21: Chinese Billionaires Market Overview (Volume and US$ Billion), 2010–2019

Figure 22: Chinese Centimillionaires Market Overview (Volume and US$ Million/Billion), 2010–2019

Figure 23: Chinese Affluent Millionaires Market Overview (Volume and US$ Million/Billion), 2010–2019

Figure 24: Chinese Mid-Tier Millionaires Market Overview (Volume and US$ Million/Billion), 2010–2019

Figure 25: Chinese Lower-Tier Millionaires Market Overview (Volume and US$ Million/Billion), 2010–2019

Figure 26: Chinese HNWI Asset Class Composition (%), 2010–2019

Figure 27: Chinese HNWI Trends in Alternative Assets (US$ Billion), 2010–2019

Figure 28: Chinese Trends in ‘Art, Wine and Wheels’, 2010–2014

Figure 29: Chinese HNWI Foreign Investment Allocation and Growth (%), 2014

Figure 30: Chinese HNWI Global Distribution of Foreign Investments (%), 2010–2019

Figure 31: Chinese HNWI Liquidity Breakdown (%), 2010–2019

Figure 32: Chinese UHNWI Asset Class Composition (%), 2010–2019

Figure 33: Chinese Wealth Management Industry – Maturity Level of Operators, 2014

Figure 34: Chinese Wealth Management Industry Behavioral Mapping, 2014

Figure 35: Chinese Wealth Management Industry – Five Forces Analysis

Figure 36: CNY to US$ Exchange Rate, 2010–2019

Figure 37: Chinese Real GDP Growth (%), 2010–2019

Figure 38: Chinese GDP per Capita (US$), 2010–2019

Figure 39: Chinese Domestic Market Capitalization (US$ Billion), 2010–2014

Figure 40: Chinese Commodity Indices, 2010–2019

Figure 41: Chinese Foreign Direct Investment (US$ Billion), 2007–2011

Figure 42: Chinese Inflation Rate (%), 2010–2019

Figure 43: Chinese Money Market Rate (%), 2010–2019

Figure 44: Chinese Balance of Payments (US$ Billion), 2010–2014

Figure 45: Chinese Government Debt as a Percentage of GDP, 2010–2019

Figure 46: Chinese Stock Market Performance, 2010–2014

Figure 47: Chinese HNWI Wealth vs GDP Ratio, 2010–2019

Figure 48: Chinese HNWIs – Volume by Wealth Band, 2010–2019

Figure 49: Chinese HNWIs – Wealth by Wealth Band (US$ Billion), 2010–2019

Figure 50: Chinese HNWIs – Wealth per Capita (US$ Million), 2010–2019

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