Asia is at the core of global wealth growth, particularly in China, where wealthy groups are rising at an unprecedented pace as the economy develops.
Of course, this means that demand for financial services is accelerating, nowhere more so than in China, the world’s second-largest economy.
According to the 2021 China Private Wealth Report compiled by China Merchants Bank and Bain & Company, China’s total personal investable assets will reach 241 trillion yuan (US$37.2 trillion) by the end of the year, with a compound annual growth rate of 13% from 2018 to 2020. In addition, total investable assets are projected to reach 268 trillion yuan by the end of 2021.
Indeed, China is set to overtake the United States in terms of having the largest concentration of ultra-high net worth (UHNW) individuals by the end of the decade, says a recent report by Boston Consulting Group.
The principal driver of the rising demand for the wealth management sector is undoubtedly the increasing size, influence and wealth of China’s middle class.
Mainland China is only set to get wealthier. The country’s middle class surpasses the entire population of the US; some 96% of urban Chinese people are property owners; and more than 2 million have more than $1.5 million to invest.
Naturally, wealth managers have been focusing on China for a long time, but it’s only now that this focus turns to action as the country has become more open in many aspects and made the decision to open its financial sector to the world.
China’s robust economic fundamentals, cutting-edge tech developments and growing middle class are crucial growth opportunities for global financial institutions. And now, additional overseas investments are expected to get in on the action.
As such, by opening up its financial industry, China has provided the wealth management sector with a stage for massive growth potential.
By relaxing the restrictions on foreign-owned businesses, this has helped the sector in China to advance, providing people with greater choice and possibilities from a broader market.
This will, in turn, force domestic firms to hike their competitiveness, thereby benefiting clients and making the industry more robust.
Furthermore, in February this year, a joint memorandum of understanding was penned by financial authorities in mainland China, Hong Kong and Macau on the upcoming launch of the Wealth Management Connect (WMC) pilot scheme in the Guangdong-Hong Kong-Macau Greater Bay Area.
This will allow cross-border investment opportunities for residents in Hong Kong, Macau and major Guangdong cities, which while boosting Hong Kong’s wealth sector, will also bolster mainland China’s.
Additionally, the agreement allows Hong Kong and mainland China to re-establish themselves as prominent global financial hubs, and by deepening the connection to Hong Kong, provides China’s wealth industry with a significant extra degree of incorporation.
Also, with China’s wealth expansion drive, the principal targets are set to be domestic investors.
Yet with the country’s current liberal stance, the number of expatriates in China may well rise too.
We can expect to see business in China increase in line with the growth of the middle class.
As the economy continues its post-pandemic rally and China’s global influence is heightened, there will likely be an influx of expats who will bring their capital, experience and expertise with them.
In consequence, demand will increase for more investment products as client expectations, markets and regulatory landscapes develop, meaning products will need to evolve to cater to these changes.
Mainland China is on track to becoming the largest financial market in the world, so both Hong Kong and Singapore will have to allow for another Asian financial hub taking the floor.
As long as China’s globalization plans keep pace and continue to appeal to foreign investors, the wealth management future in China looks very bright indeed.
Nigel Green founded deVere Group in 2002 from a single office in Hong Kong after discovering a niche market for expatriates in the financial services sector. Since then, it has grown to become one of the largest independent financial advisory organizations in the world with offices and clients across the globe.