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Wealth in China: Sizing the wealth market in China and its growth potential

Wealth in China: Sizing the wealth market in China and its growth potential

Summary

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.

Key Findings

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

Who is considered affluent in China?

How large is the Chinese wealth management market and what drives its performance?

What kind of investments do Chinese HNW individuals prefer?

What is the prognosis for wealth management in China?

Key Highlights

At the end of 2015, of the approximately 1.05 billion adults living in China 3.5% could be considered affluent. These people hold almost 85% of the country's liquid assets.

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.

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.


>Overview
Catalyst
Summary
Wealthy .% holds .% of liquid assets
Slower growth, but better times ahead
Not all of those classed as wealthy qualify as high net worth
Chinese HNW individuals held $,bn in liquid assets in
Retail Deposits dominate, mutual funds & bonds are growth drivers
Retail investment market to perform strongly despite weaker economic conditions
As in many emerging markets, deposits dominate China’s retail investment market
Deposits dominate, mutual fund holdings to grow fastest
Retail deposit growth set to pick up in , but less pronounced than the past
Deposit rates remain low and face stiff competition from money market funds
Despite strong growth rates, China’s retail bond market will remain insignificant
Subdued performance of the Shanghai Composite Index limits growth of direct equities
Money market funds' growing popularity shields funds from vagaries of stock market
Non-liquid & offshore investments preferred by Chinese investors
Chinese HNW individuals allocate % of their portfolios outside traditional liquid assets
Alternatives and commodities have become an integral part of the typical HNW portfolio in China
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
Income and capital gains taxes are the primary means of taxation
Real estate taxes are levied, but there are no wealth, gift, or inheritance taxes
US single most important booking center for Chinese wealth
China has signed nine TIEAs and numerous DTAs over the past few years
China also signed OECD’s Common Reporting Standards, taking a further step against tax evasion
Conclusions
Wealth growth is slowing but will still outstrip the West despite overseas capital drain, providing opportunities
Appendix
Definitions
Sources
Further Reading
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About MarketLine
Disclaimer
List of Tables
Table 1: Progressive tax rates levied in China, 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: Retail bond holdings negatively correlate to the Shanghai Composite Index
Figure 7: Stock market performance has been weak over the past year
Figure 8: Strong correlation between stock market performance and equity funds, and to a lesser extent mutual fund holdings
Figure 9: China’s total fund industry is dominated by money market funds
Figure 10: A significant proportion of HNW wealth is allocated to non-traditional investments
Figure 11: Chinese HNW individuals hold 27% of their assets offshore

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