China to become largest market of high-net-worth individuals

Jack Ma (third from right), executive chairman of Alibaba Group Holding Ltd, seen among Chinese tech millionaires during the opening ceremony of an academic symposium in Hangzhou, Zhejiang province. [Xu Kangping/For China Daily]

China will become one of the largest markets of high-net-worth individuals in the world, with the number of high-net-worth families rising from 2.07 million in 2015 to 3.88 million at the end of 2020, a report released on Wednesday said.

During the same period, China's personal investable assets will increase from 113 trillion yuan ($17 trillion) to 200 trillion yuan at a compound annual growth rate of 12 percent. The investable assets of high-net-worth individuals will account for 51 percent of the total in 2020, said the report released by Industrial Bank Co Ltd and The Boston Consulting Group.

"Chinese banks are increasingly turning toward capital-light activities and asset management," said Chen Jinguang, vice-president of Industrial Bank, a medium-sized Chinese commercial lender based in Fuzhou, Fujian province.

"During the transition, private banking will become a crucial profit growth engine for the banking industry," Chen said.

From 2014 to 2015, among 12 banks that announced their performances in private banking, nine posted more than 20 percent growth in assets under management.

BCG partner and managing director David He said huge market opportunities will continue to emerge in the next five years, as an increasing number of private banking clients allocated a larger part of their assets overseas. He cited the fluctuation of the yuan as a major reason behind the growth.

"Compared with other countries, the current proportion of China's overseas personal assets to the total is much lower," he said.

"We estimate that the proportion will rise to 9.4 percent in 2020 from 4.8 percent at present, increasing the size of the overseas investment market by 13 trillion yuan."

According to a recent survey of 1,074 high-net-worth individuals whose family's investable assets exceeded 6 million yuan, 788 individuals had not yet made an overseas investment but more than 50 percent of them said they would consider it in the next three years.

Their investable assets ranged from 6 million yuan to 10 million yuan, showing that the threshold for bank clients to enjoy professional advice on global asset allocation was coming down, along with a growing appetite for overseas investment.

The report said this would provide a chance for Chinese banks to overtake their foreign counterparts in terms of private banking business.