Product Code: VF0015CI
Thanks to lower economic productivity, the remarkable wealth growth rates of the past few years will not be repeated in China over the forecast period. Nevertheless, strong predicted retail investments growth - led by strong mutual fund performance - will continue to see the market grow at a faster rate than in the wider region. Between 2015 and 2019 liquid assets held by affluent individuals are forecast to record a compound annual growth rate (CAGR) of 9.2%, representing a sizable opportunity for wealth managers operating in the country.
- At the end of 2015, of the approximately 1.05 billion adults living in China 3.5% could be considered affluent.
- Asset growth is expected to be strongest in the $10m+ asset band, which will record a CAGR of 14.1% between 2015 and 2019, compared to a CAGR of 8.8% for mass affluent individuals.
- Deposits continue to dominate China's retail investments market, but mutual fund holdings are forecast to grow at the fastest pace over the next five years.
- Chinese high net worth (HNW) investors allocate a noteworthy proportion of their investable assets into non-traditional investments, mostly in direct property. However, this is expected to change thanks to the recent drop in property prices.
Wealth in China: Sizing the Market Opportunity analyzes China's wealth and retail savings and investments markets, with a focus on the HNW segment. The report is based on our proprietary datasets.
Specifically, the report:
- Sizes the affluent market (both by the number of individuals and the value of their liquid assets) using Verdict Financial's proprietary datasets.
- Analyzes which asset classes are favored by Chinese investors and how their preferences impact the growth of the total savings and investments market.
- Examines HNW clients' attitudes towards non-liquid investments, such as property and commodities.
- Identifies key drivers and booking centers for offshore investments.
Reasons To Buy
- Benchmark your share of the Chinese wealth market against the current market size.
- Forecast your future growth prospects using our projections for the market to 2019.
- Identify your most promising client segment by analyzing the penetration of affluent individuals in China - both at country and regional level.
- Evaluate your HNW proposition by understanding how the local tax system affects your HNW clients.
- Review your offshore strategy by learning the HNW motivations for offshore investments and their preferred booking centers.
Table of Contents
- Wealth growth is slowing but will still outstrip the West
- Key findings
- Critical success factors
SIZING AND FORECASTING THE CHINESE WEALTH MARKET
- 2.8% of China's affluent individuals can be considered HNW
- Affluent individuals in China account for 3.5% of the total adult population
- Affluent individuals account for 3.5% of the population but hold 84.1% of liquid assets in China
- Chinese HNW individuals held $3,565bn in liquid assets in 2015
DRIVERS OF GROWTH IN THE CHINESE WEALTH MARKET
- China's retail savings and investments have impressed with remarkable growth in recent years
- China's retail investment market is forecast to perform strongly despite weaker economic conditions
- As can be expected in emerging markets, deposits dominate China's retail investment market
- Deposits continue to dominate China's retail investment market, but mutual fund holdings are forecast to grow fastest
- Retail deposit growth is set to pick up again in 2016, but will be less pronounced than in the past
- However, deposit rates remain low and face stiff competition from money market funds
- Despite strong growth rates, China's retail bond market will remain insignificant
- The subdued performance of the Shanghai Composite Index will limit growth of direct equities
- Money market funds are growing in popularity, shielding funds from the vagaries of the stock market
HNW INVESTMENT PREFERENCES
- Chinese HNW individuals allocate 35% of their portfolios outside traditional liquid assets
- Chinese HNW investors allocate an above-average proportion of their wealth into property, but this is about to change
- Alternatives and commodities have become an integral part of the typical HNW portfolio in China
- A significant proportion of HNW wealth is invested offshore
- Despite maintaining a closed capital account, a significant amount is leaving the country every year
- Better returns overseas and local economic instability prompt Chinese individuals to invest offshore
- Tax is a comparatively limited driver for offshore investments
- The US is the single most important booking center for Chinese HNW wealth
- Abbreviations and acronyms
- Supplementary data
- Common Reporting Standard (CRS)
- Double taxation agreement (DTA)
- Foreign Account Tax Compliance Act (FATCA)
- Liquid assets
- Mass affluent
- Tax information exchange agreement (TIEA)
- Global Wealth Model methodology
- Global Retail Investments Analytics methodology
- Verdict Financial's 2015 Global Wealth Managers Survey
- Further reading
- About Verdict Financial
List of Tables
- Table 1: Progressive tax rates levied in China, 2015
- Table 2: China: adult population segmented by affluent category and asset band (000s), 2010?14
- Table 3: China: adult population segmented by affluent category and asset band (000s), 2015e?19f
- Table 4: China: total liquid wealth segmented by affluent category and asset band ($bn), 2010-14
- Table 5: China: total liquid wealth segmented by affluent category and asset band ($bn), 2015e-19f
- Table 6: Chinese yuan-US dollar exchange rate, December 31, 2014 and December 31, 2015
List of Figures
- Figure 1: Affluent individuals represented 3.52% of the population in 2015
- Figure 2: The affluent population holds 84.1% of retail liquid assets in China
- Figure 3: While lower than in the past, retail savings and investment growth is forecast to remain strong
- Figure 4: Deposits account for 81.1% of the Chinese retail and investment market
- Figure 5: Mutual funds and bonds are forecast to grow at impressive rates
- Figure 6: Deposit growth is inextricably linked to real GDP growth, but importantly always outperforms it
- Figure 7: Retail bond holdings are negatively correlated to the Shanghai Composite Index
- Figure 8: Stock market performance has been weak over the past year
- Figure 9: There is a strong correlation between stock market performance and equity funds, and to a lesser extent mutual fund holdings
- Figure 10: China's total fund industry is dominated by money market funds
- Figure 11: A significant proportion of HNW wealth is allocated to non-traditional investments
- Figure 12: Chinese HNW individuals hold 27% of their assets offshore
- Figure 13: Asset diversification and investment options remain the biggest motivations for offshore investment
- Figure 14: The largest proportion of Chinese HNW offshore wealth is booked in the US
- Figure 15: The Chinese government has signed several TIEAs over the past few years