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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