Total private wealth in China booms to estimated $28 trillion

16 October 2017 Consultancy.uk

The number of HNWIs in China has climbed from 181,000 in 2006 to more than an estimated 1.8 million this year. Total investable private wealth in China has correspondingly boomed, topping $28 trillion. Wealthy investors are increasingly focused on preserving their capital, and a range of professional service providers continue to play a key role in their wealth management.

The boom in the Chinese economy has seen its number of wealthy individuals increase significantly, with successful businesses climbing their way into the wealthy category along with the professionals who serve them. In a new report from Bain & Company and China Merchants Bank, the firms surveyed the most recent statistics pertaining to private wealth growth in China, as well as preferences relating to its preservation.

The number of high-net-worth-individuals (HNWI) in China has boomed over the past decade, increasing by more than 20% in the $1.5 million in investable assets category, by 33% in the >$1.5 million and <$15 million range, and 24% in the ultra-high-net-worth-individual (UHNWI) category, holding at least $15 million in investment assets. In total, the number of wealthy people has increased from 181,000 in 2006 to 1.87 million estimated for this year, with the number of UHNWI increasing from 7,000 people a decade ago to 116,000 people estimated for this year. The study notes that growth has tapered off slightly in the most recent period, with the two highest wealth categories decreasing the most significantly.

Growth in HMWI populationThe wealth of the country’s most affluent people has correspondingly skyrocketed in the same period, with total wealth increasing from RMB26 trillion ($3.9 trillion) in 2006 to RMB188 trillion ($28 trillion) estimated for the most recent year. Wealth creation has slowed somewhat also, falling from 20% CAGR between 2006 and 2016, to 14% CAGR between 2016 and 2017.

The allocation of wealth has fallen too, with cash as a proportion of total held assets falling. Meanwhile, considerable growth was noted in the net value of investment property and capital market products. Other areas of investment include bank wealth management products and other domestic investments.

Change in HMWI mix

The type of occupation from which HNWI derived their wealth has shifted in recent years, with the proportion of wealth generated from first generation business owners decreasing from 70% to 41% between 2009 and 2017, while the number of second generation successors has hit 10%.

The number of gold collar professionals has increased significantly – up from 12% to 29%. Both segments have tended to benefit each other’s success; the boom in tech-sector companies has created demand for high-skilled professionals, many of whom end up with company shares on top of their hefty benefits.

Wealth preservation society

In terms of generation UHNWI, businesses and professional investment remain the most successful as a proportion, although the number of professional investors as a proportion of total wealth generation has fallen from 13% to 5%. Other forms of income generation have increased from 5% to 15%.HNWI's wealth preservationRetaining capital was found to be an increasingly popular aspect of the wider value creation process, up significantly from a similar survey in 2009, although down slightly on 2013 and 2015 surveys.

The number of respondents who said wealth preservation was their main objective in 2017 stood at 26% of all respondents and 24% of UHNWI respondents, while those focused on wealth inheritance increased significantly in 2015, but stayed relatively stable for 2017. For the UHNWI, wealth inheritance was noted as slightly more important. For the other categories, both groups were relatively in alignment on objectives.

The rapid growth of financial wealth, as well as changing attitudes among the young generation of new wealth, appears to be increasing demand for asset management among wealthy individuals in China. The percentage of assets managed by an institution increased steadily from 36% to 65% between 2009 and 2015, in light of decreased focus on bank wealth management and increased focus on private banking. The most recent year saw the level of institutionally managed wealth decrease slightly to 63%, with self/family taking up the slack.China's HNWIs are turning to professional servicesThe study notes that the number of HNWI is set to continue to rise in China as new businesses arise and demand for professional services continues. Changing attitudes around wealth preservation and inheritance are both likely to continue to create opportunities for wealth managers and other financial services experts in the wider market.

According to a report from Capgemini, global HNWI wealth – one of the segments of the most affluent – reached a total of $60 trillion among 15.4 million people globally.

Related: Chinese luxury customer market to hit $1 trillion RMB by 2025.

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Project management industry adds £156 billion of value to UK economy

15 April 2019 Consultancy.uk

Project management has grown into one of UK’s largest areas of business over the past decade, amid the increasing ‘projectification’ of work. With the gross value added to the UK economy by project management estimated to be £156 billion, this trend is likely to continue in the coming era.

Despite the huge success of project management in recent years, until now there has been relatively little data available on the size of project activity. As a result, there has been a great deal of debate on things like the number of people involved in the sector, the number of projects, and how it contributes to economic output. Due to this need for clarity, APM, the UK’s professional body for project management (the largest organisation of its kind in Europe, with 28,000 individual members) commissioned economists from PwC to shed light on the industry's economic impact.

The research concluded that the profession makes a more significant contribution to the UK economy than the financial services sector. 2.13 million full-time equivalent workers (FTEs) were employed in the UK project management sector, generating £156.5 billion of annual gross value added (GVA). In comparison, the financial services sector contributes £115 billion, and the construction industry adds £113 billion.

Gross value added to UK economy

Commenting on the discovery, Debbie Dore, Chief Executive of APM said, “Project management runs as a ‘golden thread’ through businesses, helping to develop new services, driving strategic change and sector-wide reform.”

Who is a ‘project manager’?

To reach these estimates, PwC’s researchers used detailed models to map out the value of project management activity. They ultimately defined relevant ‘projects’ as “temporary, non-routine endeavours or rolling programmes of change designed to produce a distinct product, service or end result… [with] a defined beginning and end, a specific scope, a ring-fenced budget, [and] an identified and potentially dedicated team with a project manager in charge.”

Building on this, they then went on to define what the act of project management actually is. The job consists of applying “processes, methods, knowledge, skills and experience” so that clients can meet their objectives and bring about planned outputs or outcomes. The analysts added that this includes “initiating the project, planning, executing, controlling, quality assuring and closing the work of an identified and dedicated team according to a specified budget and timeframe.”

Importantly, it should be noted that the profession is not exclusive to only roles explicitly labelled as ‘project manager’, but to any role where specialist project management skills are used. This means that across sectors these roles can have very different titles, from the self-explanatory contract managers of procurement, or the campaign managers of advertising, to the likes of festival co-ordinators in the events sector, and many more. The roles in question also span all strategic levels of the profession, from strategic to tactical and operational positions.

Gross value added of project management profession

From a sector perspective, the financial and professional services, construction and healthcare industries make up almost two-thirds of the total project management GVA. At the same time, understandably, the UK Government has a huge project portfolio, which further drives the size of the GVA the sector contributes, thanks to megaprojects like HS2 and Crossrail.

Commenting on this to the report’s authors, Oliver Dowden, Minister for Implementation remarked, “Project delivery is at the heart of all Government activity, whether it’s building roads and rail, strengthening our armed forces, modernising IT or transforming the way government provides public services to citizens. Getting these projects right is essential if we are to ensure that we build a country that works for everyone.”

Throughout 2019, 26 major government projects were delivered, representing a fifth of the overall Government Major Projects Portfolio (GMPP) of 133 projects. According to the IPA annual report 2017-18, these represented a whole life cost of £423 billion. In addition to this were a plethora of smaller scale projects, and those in early development.

Elsewhere, with the increasing digitalisation of the economy impacting entities of all shapes and sizes, IT and digital transformations tended to dominate the projects of the UK scene alongside new product development projects, with a respective 55% and 46% of organisations in the research sample having undertaken these types of project in the past year. At the same time, this varied across sectors, and unsurprisingly, in the construction and local government sectors, fixed capital projects were the main project type undertaken.

Outlook

Looking to the future, 40% of business leaders expect project management will grow in the coming years due to the increased use of projects – or the ‘projectification’ of the UK. In a trend that has been witnessed elsewhere, organisations have to rapidly and continuously change in the digital age of business, driving the need for project management.

Outlook for project management services

An increased focus on value over cost – especially in the construction sector – and a forecast increase in the number of international projects are predicted to be key drivers of growth, according to the expert contributors. However, this will not happen in the absence of challenges; more than half of organisations expressed concern over the perceived impact of political uncertainty in the UK. Skills and capability shortages were also cited as a potential barrier by a third of organisations.

With regard to budgets, meanwhile, a third of those surveyed by PwC said they expect the size of project budgets will increase in the coming three years, while 40% anticipate a growth in project size. As the profession continues to mature, and as the recognition of the importance of good project management grows, it is expected that a greater proportion of project work will gain more distinct attribution to the profession itself, giving more recognition and appreciation to the role of the project manager.

Speaking on the findings of the study, Sandie Grimshaw, a Partner at PwC, concluded, “The project management profession is relatively new compared to some other professions, such as lawyers, teachers and doctors. However, as project management is a core competence vital to organisations in the UK, the profession is critical and will continue to grow in stature.”