Emerging Opportunities in the Chinese Wealth Management Industry: Market Size, Strategies, Products and Competitive Landscape

Transcription

1 Emerging Opportunities in the Chinese Wealth Management Industry: Market Size, Strategies, Products and Competitive Landscape BRICdata John Carpenter House 7 Carmelite Street London EC4Y 0BS United Kingdom Tel: +44 (0) Fax: +44 (0) Industry Forecast Report Reference code: IS2016MR Published: June

2 EXECUTIVE SUMMARY 1 Executive Summary China s GDP recorded strong annual growth of X.X% in 2011, growth that is expected to continue over the forecast period. This makes the country an attractive investment location for wealth management firms. Moreover, China has the main components that comprise a high-growth wealth management market, including a very large and young affluent customer base, an improving wealth situation among the global Chinese population, a governmental desire to more tightly regulate the country s financial services, and an increasing share of organized companies as compared to the unorganized workforce. Wealth and volume of HNWIs is expected to double over the forecast period China currently has the second-largest number of high-net-worth-individuals (HNWIs) in the Asia-Pacific region, after Japan. There were X,XXX,XXX HNWIs in China in 2011, who cumulatively owned assets that valued US$X.X trillion. The volume of HNWIs in China increased at a compound annual growth rate (CAGR) of during the review period ( ), while the total wealth of China s HNWIs recorded a CAGR of during the review period. These figures are particularly impressive as they include the adverse impact of the global financial crisis, when total HNWI wealth fell by XX% in 2008 and the number of HNWIs worldwide fell by XX%. In China however, the wealth and volume of HNWIs recovered rapidly, with total HNWI wealth in the country recording an annual growth of XX% in 2009 and the volume of HNWIs in the country increasing by XX% in the same year. Over the forecast period ( ), the wealth and volume of HNWIs in the country is expected to continue to increase strongly, with the number of Chinese HNWIs projected to reach X,XXX,XXX individuals by 2016 and total Chinese HNWI wealth expected to value US$X.X trillion in the same year. Chinese HNWIs expected to increase their investment in equities, alternative wealth products and collectable assets The popularity of alternative asset holdings has increased dramatically over the past two years, growth that is expected to continue into the forecast period and help the share of alternatives within total HNWI assets to increase from X.X% in 2011 to X.X% in This increase is expected to be driven by significant growth in hedge funds, private equity, collectables and index linked funds. Moreover, a shift from cash into equities is also anticipated, with equity allocations as a percentage of total assets expected to rise from their current level of XX% to reach XX% by Other notable changes projected include a rise in fixed income investments from X.X% of total assets in 2011 to X.X% in 2015; an increase that is expected to be driven by significant development of the local corporate bond market, which is expected to grow by over XX% per annum during the forecast period. Rising demand for investment advisory services among China s HNWIs China s HNWIs provide strong growth prospects for the country s wealth management firms and private banks, as there is currently a relatively low penetration of financial services in China. To be successful, financial service providers must take into account the specific needs, traditional conservatism and unique attitudes towards family wealth prevalent among Chinese HNWIs. Furthermore, the large number of newly wealthy Chinese HNWIs is the prime target for wealth management companies. Due to this increasing demand for investment advisory services, most commercial banks and wealth management companies in China have begun to offer a personal relationship manager to their privileged clients. Finally, there is particularly strong potential in the provision of the family office model and bespoke offshore services. Increased regulation may streamline China s wealth management and private banking industry As a result of the ongoing political developments regarding the regulation of both China s overall financial sector and the country s wealth management industry, BRICdata research believes that increased regulation of the industry is highly probable over the forecast period. Furthermore, research suggests that such regulation will have a positive impact on the industry as it clarifies and streamlines taxation and the country s financial regulatory structure. Marketing strategies of commercial banks and private wealth management companies Commercial banks, private wealth management companies and asset management companies are adopting various marketing strategies in order to become successful in the Chinese wealth management industry. Foreign banks, such as Standard Chartered, tend to spend heavily on media advertising and customer acquisition campaigns; while local commercial banks tend to build strategic partnerships with local and foreign asset management companies in order to offer a better quality of service. Some notable examples of this include Minsheng Royal Fund Management Company, which is XX% owned by China Minsheng Bank, XX% owned by Royal Bank of Canada, and XX% owned by Three Gorges Finance Company; Natixis Banking Group, which was formed through a joint venture between the bank and ICBC; and Ping An Securities, which was formed by a joint venture between UOB and Ping AN Insurance. ICBC, Bank of China, China Banking Corporation, Standard Chartered, China Merchant Bank, Weir & Associates and other domestic and foreign banks provide a number of wealth management services to the country s HNWIs, such as portfolio management, trust and estate planning, investment management, and tax advisory services. 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3 EXECUTIVE SUMMARY Competition expected to intensify with the arrival of foreign companies Unsurprisingly, the Chinese wealth management market is currently highly fragmented as a result of it being in an early stage of development. Moreover, the country s organized service providers, such as commercial banks and wealth management companies, have thus far predominantly focused on China s urban population, neglecting a potentially lucrative customer base of HNWIs that reside in rural areas. With research indicating that this rural HNWI population could account for as much as a fifth of the country s total HNWI population, this group could provide significant business opportunities for new wealth management companies entering the Chinese market. Finally, the inflow of foreign wealth management providers has forced domestic companies to become more competitive, and compelled domestic banks, brokerage houses and new entrants to develop their wealth management service offerings. Page 3

4 TABLE OF CONTENTS TABLE OF CONTENTS 1 Executive Summary Chinese Wealth Management Market Environment Macroeconomic Fundamentals GDP at constant prices Inflation rate Annual disposable income Shanghai Stock Exchange market capitalization Interest rate Regulatory Framework Banking regulations Wealth management and related norms Regulatory framework on hedge funds Market Size and Growth Potential of Chinese Wealth Management Market Size of Chinese Wealth Management by HNWIs High-net-worth-individuals (HNWIs) Ultra-high-net-worth-individuals (UHNWIs) The core high-net-worth individuals (core HNWIs) HNWI Investments by Asset Class Investment trends in liquid assets equity, fixed income and cash deposits Investment trends in cash and deposits Trends in alternative assets Investments in real estate Investment trends in equity Trends in art, wine and automobiles Wealth Management Services in China Portfolio Management and Portfolio Rebalancing Bank of China wealth management China Merchant Bank (CMB) Sunflower financial management planning service Standard Chartered Bank s investment services Trusts and Estate Planning and Management China Banking Corporation s estate planning services Weir & Associates trust and planning company Private Banking and Financing ICBC Private Banking Services China Merchant Bank s Sunflower VIP service CitiGold private banking Investment Management and Advisory ICBC Perfect Match wealth management product Bank of China s Zhongyinjifu wealth management investment plan Trends and Growth Drivers HNWIs Shifting Investments from Residential Real Estate as Regulations Cool the Market Page 4

5 TABLE OF CONTENTS 5.2 Tax Optimization Products Are Not Currently in High Demand Increasing Number of HNWIs in China Presents Significant Business Opportunities Real GDP Growth Rate Chinese Wealth Management Customers are Shifting to Professional Institutions Money Lenders are Shifting Their Focus to Wealth Management Products Increasing Number of Wealth Management Institutions in the Chinese Market Emergence of Offshore Wealth Management in China Chinese HNWIs Are Using Multiple Wealth Management Institutions Marketing and Growth Strategies of Chinese Wealth Management Service Providers Providing Personalized Investment Services Online Wealth Management Services Mobile Application for Wealth Management Services Bank of China s mobile investment management application Bank of Beijing iphone application for marketing ICBC exclusive mobile banking wealth management products Product Diversification Partnering with Assets Management Companies Utilizing Social Media to Interact With Customers Chinese banks are using social media platforms to build strong relationships with their customers Strategies to Succeed in the Chinese Wealth Management Industry Effective Customer Segmentation Building an Effective Distribution Strategy Brand Building Identifying Customer Needs to Increase Share of Wallet Building Core Competencies Degree View of Investment Challenges Underdeveloped Wealth Management Products Lack of Expert Professionals in Wealth Management Complicated and Cumbersome Tax System Complex Regulatory Structure Move Away From Self Management Demand for Intergenerational Wealth Transfer and Younger Clientele Philanthropy Industry Structure Wealth Managers and Private Banks Public sector banks Wealth managers Private-sector banks Foreign banks and MNCs Joint ventures Company Profiles Page 5

6 TABLE OF CONTENTS 10.1 Bank of China Company overview Business segmentation Agricultural Bank of China Limited Company overview Business segmentation China Construction Bank Corporation Company overview Business segmentation China Merchants Bank Company Limited Company overview Business segmentation Ping An Insurance (Group) Company of China Ltd Company overview Business segmentation Non-Banking Investment Management Companies in China China Asset Management (ChinaAMC) Credit Suisse China China CITIC Bank Appendix About BRICdata Definitions Areas of expertise Methodology Disclaimer Page 6

7 TABLE OF CONTENTS LIST OF FIGURES Figure 1: Chinese GDP at Constant Prices (US$ Billion), (Base Year ) Figure 2: Chinese Inflation Rate (%), Figure 3: Chinese Annual Disposable Income (US$ Billion), Figure 4: Chinese s Shanghai Stock Exchange Market Capitalization (US$ Trillion), Figure 5: China Central Bank Interest Rate (%), September 2009 July Figure 6: Chinese Wealth Management Industry Customers HNWI Composition Figure 7: Chinese HNWIs Value by Wealth Band (US$ Billion), Figure 8: Chinese HNWIs Value by Wealth Band (US$ Billion), Figure 9: Chinese HNWIs Regional Distribution (% Share), Figure 10: Chinese HNWIs Regional Distribution Key Regions, Figure 11: Chinese UHNWIs Volume by Type of UHNWI, Figure 12: Chinese UHNWIs Volume by Type of UHNWI, Figure 13: Chinese UHNWIs Value by Type of UHNWI (US$ Billion), Figure 14: Chinese UHNWIs Value by Type of UHNWI (US$ Billion), Figure 15: Chinese UHNWIs Regional Distribution (% Share), Figure 16: Chinese Core HNWIs Volume by Type of Core HNWI, Figure 17: Chinese Core HNWIs Volume by Type of Core HNWI, Figure 18: Chinese Core HNWIs Value by Type of Core HNWI (US$ Billion), Figure 19: Chinese Core HNWIs Value by Type of Core HNWI (US$ Billion), Figure 20: Asset Class Composition (% Share), Figure 21: Chinese HNWI Liquid Asset Composition (US$ Billion), Figure 22: HNWIs Investment in Cash and Deposits (US$ Billion), Figure 23: Chinese HNWI Trends of Investments in Alternative Assets (in US$ Billion), Figure 24:Chinese HNWI Trends of Investments in Alternative Assets (in US$ Billion), Figure 25: Chinese HNWI Investment in Real Estate (US$ Billion), Figure 26: Chinese HNWI Investment in Equities (US$ Billion), Figure 27: Mercedes-Benz and Porsche* Cars Unit Sales in Chinese Market Figure 28: Wealth Management Services In China Figure 29: Chinese Wealth Management Trends and Growth Drivers Figure 30: HNWI Growth Factor Correlation, Figure 31: PICC Social Media Platform on Weibo.com Figure 32: Strategies to Succeed in the Chinese Wealth Management Industry Figure 33: A Unified View of Customer Investment Figure 34: Challenges in Chinese Wealth Management Figure 35: Chinese Wealth Management Industry Structure Figure 36: Major Companies in Chinese Wealth Management Industry Page 7

8 TABLE OF CONTENTS LIST OF TABLES Table 1: Chinese GDP at Constant Prices (US$ Billion), (Base Year )... 9 Table 2: Chinese Inflation Rate (%), Table 3: Chinese Annual Disposable Income (US$ Billion), Table 4: Chinese s Shanghai Stock Exchange Market Capitalization (US$ Trillion), Table 5: China Central Bank Interest Rate Changes (%), September 2009 July Table 6: Chinese HNWIs Volume by Wealth Bands, Table 7: Chinese HNWIs Volume by Wealth Bands, Table 8: Chinese HNWIs Volume by Wealth Bands, Table 9: Chinese HNWIs Volume by Wealth Bands, Table 10: Chinese HNWIs Value by Wealth Band (US$ Billion), Table 11: Chinese HNWIs Value by Wealth Band (US$ Billion), Table 12: Chinese UHNWIs Volume by Type of UHNWI, Table 13: Chinese UHNWIs Volume by Type of UHNWI, Table 14: Chinese UHNWIs Value by Type of UHNWI (US$ Billion), Table 15: Chinese UHNWIs Value by Type of UHNWI (US$ Billion), Table 16: Chinese Core HNWIs Volume by Type of Core HNWI, Table 17: Chinese Core HNWIs Volume by Type of Core HNWI, Table 18: Chinese Core HNWIs Value by Type of Core HNWI (US$ Billion), Table 19: Chinese Core HNWIs Value by Type of Core HNWI (US$ Billion), Table 20: Chinese HNWI Liquid Asset Composition (%), Table 21: Chinese HNWI Trends of Investments in Alternative Assets (US$ Billion), Table 22: Chinese HNWI Trends of Investments in Alternative Assets (US$ Billion), Table 23: Chinese HNWI Alternative Asset Composition (%), Table 24: Chinese Real GDP Growth Rate (%), Table 25: ChinaAMC: Main Services Table 26: Credit Suisse China: Main Services Table 27: CITIC Bank Corporation Limited: Main Services Table 28: Definitions Page 8

9 15 Sept Oct Oct Nov Dec Oct Dec Feb Apr Jul CHINESE WEALTH MANAGEMENT MARKET ENVIRONMENT 2 Chinese Wealth Management Market Environment China s rapid economic growth has led to considerable developments in the country s banking services and increased demand for wealth management products. During the review period, the total number of HNWIs in the country increased from XXX,XXX in 2007 to X,XXX,XXX in 2011, recording a CAGR of. Similarly, the total wealth of China s HNWIs increased from US$X.X trillion in 2007 to US$X.X trillion in 2011, recording a CAGR of during the review period. 2.1 Macroeconomic Fundamentals China s economy faced a very complex domestic and international economic environment in 2010, and withstood several severe natural disasters and challenges. However, the country still recorded rapid growth by consolidating and expanding the strong results it achieved by overcoming the global economic crisis. Moreover, as the Chinese economy continues to expand, the country s banking and financial services companies are expected to introduce more innovative and advanced wealth management products and services into Chinese wealth management Interest rate After increasing China s prime interest rate three times in 2011, the Central Bank of China kept the country s interest rate unchanged at in July Notably, the central bank lowered China s prime interest rate several times in 2008 in an attempt to strengthen the country s economy in the wake of the global financial crisis. Table 5: China Central Bank Interest Rate Fluctuations (%), September 2009 July 2011 Year Repo Rate (%) September 15, 2008 October 9, 2008 October 30, 2008 November 21, 2008 December 22, 2008 October 19, 2010 December 25, 2010 February 8, 2011 April 6, 2011 July 6, 2011 Source: BRICdata analysis Figure 5: China Central Bank Interest Rate Fluctuations (%), September 2009 July % 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% China Central Bank Interest Rates Source: National Bureau of Statistics of China and BRICdata analysis Page 9

10 MARKET SIZE AND GROWTH POTENTIAL OF CHINESE WEALTH MANAGEMENT CUSTOMERS 3 Market Size and Growth Potential of Chinese Wealth Management Following the significant impact of the global financial crisis in 2008 and 2009, China s economy recovered rapidly and recorded a double-digit GDP growth in This situation was mirrored in the country s investment markets, where strong growth in 2009 and 2010 followed a steep decline in 2008, growth that was driven by an economic stimulus package of CNYX trillion. The strongest growth was recorded by the Chinese stock and real estate markets, two of the country s most important investment markets. Meanwhile, BRICdata research indicated a sizable shift in Chinese HNWI asset allocation during the same period, as alternative investment vehicles emerged as the new focus for the country s HNWI population. These alternative investments included private funds invested in secondary markets created through trust companies and real estate trusts, along with overseas investments. By the end of 2011, the total value of investable assets held by individuals in China totaled US$X.X trillion, a XX% increase over A detailed analysis of these assets shows that the market value of capital market products recorded a CAGR of XX% from 2008 to 2010, while China s net investment property values increased at a CAGR of XX% over the same period. Other alternative investments, represented by private equity and private funds invested in secondary markets, recorded a CAGR of XXX% from 2008 to 2010, emerging as a popular investment option for China s HNWIs. 3.1 Market Size of Chinese Wealth Management by HNWIs The Chinese wealth management industry services the country s upper-income population, which includes high-net-worthindividuals that have investable assets of US$X.X million or more, excluding their primary residence, collectibles, consumables and consumer durables High-net-worth-individuals (HNWIs) The substantial economic stimulus package implemented by the Chinese government in the wake of the global financial crisis significantly increased the correlation between the country s GDP, real estate, equity markets and corporate earnings, a development that played a vital role in the number of Chinese HNWIs increasing by approximately XX% from 2007 to Research also indicates that the relatively modest impact of the global financial crisis on the Chinese economy and the country s rapid recovery allowed Chinese wealth creation to continue throughout the review period. For example, though the volume of Chinese HNWIs declined across all wealth bands in 2008, this was followed by a XX% annual increase in the number of HNWIs in the country in Interestingly, while the number of UHNWIs in China grew at a faster rate than the number of Chinese core millionaires during the review period, it is core millionaires that account for the vast majority of China s overall HNWI population and any increase or decline in the country s UNHWI population therefore has relatively little impact on its overall HNWI volume. Consequently, the robust increase recorded in China s total HNWI population was driven by a strong rise in China s core millionaire volume that followed strong economic recovery and asset class growth in 2009 and 2010, as well as a more modest than anticipated decline in real estate prices in The total volume of Chinese HNWIs is expected to record a CAGR of X over the forecast period, to reach a projected total of X,XXX,XXX in Similarly, the number of core millionaires in the country is expected to record a forecast-period CAGR of X, while the number of Chinese UHNWIs is expected to reach XX,XXX by Page 10

11 MARKET SIZE AND GROWTH POTENTIAL OF CHINESE WEALTH MANAGEMENT CUSTOMERS Volume of HNWIs In terms of the share of total HNWI volume held by the various wealth bands; core millionaires accounted for the vast majority in 2011, while UHNWIs accounted for only a very small proportion. During the review period, the share of total HNWI volumes held by core millionaires declined while the share of Chinese HNWIs increased by X.XX percentage points. This change was primarily due to the fact that the share of lower tier millionaires declined by X.XX percentage points during the review period. Table 6: Chinese HNWIs Volume by Wealth Bands, Wealth Bands UNHWIs X,XXX.X X,XXX.X X,XXX.X X,XXX.X X,XXX.X CAGR XX.XX % Core HNWIs XXX,XXX.X XXX,XXX.X XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X Total Volume of HNWIs XXX,XXX.X XXX,XXX.X XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X Table 7: Chinese HNWIs Volume by Wealth Bands, ,400,000 1,200,000 1,000, , , , , Volume of High-Net-Worth Individuals Page 11

12 MARKET SIZE AND GROWTH POTENTIAL OF CHINESE WEALTH MANAGEMENT CUSTOMERS The total volume of Chinese HNWIs is expected to increase from X,XXX,XXX in 2012 to X,XXX,XXX in 2016, recording a projected CAGR of X over the forecast period. This growth in overall HNWI volumes is expected to be supported by favorable economic government initiatives, the country s positive investment environment, and a strong national economic outlook. Table 8: Chinese HNWIs Volume by Wealth Bands, Wealth Bands CAGR UNHWIs X,XXX.X XX,XXX.X XX,XXX.X XX,XXX.X XX,XXX.X X Core HNWIs X,XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X X Total Volume of HNWIs X,XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X X Table 9: Chinese HNWIs Volume by Wealth Bands, ,500,000 2,000,000 1,500,000 1,000, , Volume of High-Net-Worth Individuals Page 12

13 GDP Growth % MARKET SIZE AND GROWTH POTENTIAL OF CHINESE WEALTH MANAGEMENT CUSTOMERS Demographic breakdown of Chinese HNWIs by region While the areas shown in the below figure account for XX% of China s HNWI wealth, the fact that the remaining XX% comes from the rest of the country demonstrates the fact that there are significant wealth holdings in China s second and third tier cities and that these cities are taking on an increasingly important role in the country s continued economic development. Despite this however, China s most important economic regions remain the more developed Tier I cities of the Pearl River Delta, Yangtze River Delta (YRD) and Bohai Economic Rim. As China has three major economic hubs that act as centers of wealth creation, the fact that that Beijing continues to account for the largest number of HNWIs in the country is interesting as it demonstrates the vital role the Chinese government still plays in the country s economic development; a point further reinforced by the fact that many government officials are themselves HNWIs. However, it should also be noted that the YRD which consists of Shanghai, Zhejiang and Jiangsu is home to XX% of China s HNWI population, suggesting that the region s famed entrepreneurialism and business knowledge remain the most important factors in wealth creation. Figure 9: Chinese HNWIs Regional Distribution (% Share), 2011 Rest of China Beijing Guangdong Figure 10: Chinese HNWIs Regional Distribution Key Regions, % Bubble size: No. of HNWI 14% 12% Zhejiang Jiangsu Tianjin 10% 8% 6% 4% 2% Guangdong Shanghai Beijing 0% 7% 8% 9% 10% 11% 12% 13% 14% % Growth Number of HNWI Page 13

14 MARKET SIZE AND GROWTH POTENTIAL OF CHINESE WEALTH MANAGEMENT CUSTOMERS Ultra-high-net-worth-individuals (UHNWIs) China s UHNWI population comprises the top of the Chinese wealth distribution pyramid, accounting for X.X% of China s total wealth and nearly a quarter of all Chinese HNWI wealth. In China, UHNWIs have a unique status in the eyes of the general public, as over a fifth of this group are super-elite Renminbi billionaires, all of whom have at least US$XXX million in investable assets. Volume of UHNWIs In 2011, UHNWIs accounted for only of China s total HNWI population. As a proportion of total UHNWI volume, affluent millionaires accounted for the highest share of XX% in 2011, while centimillionaires accounted for a XX% share and billionaires accounted for the remaining X% share. From 2010 to 2011, the number of centimillionaires in China grew by XX%, compared to a XX% growth in the number of affluent millionaires and a XX% growth in the number of billionaires. Despite relatively modest national economic performance and a decline in the Chinese stock market during the first half of 2011, the international and asset class diversification of the country s UHNWIs allowed the band to continue to record robust growth throughout The global financial crisis in 2008 negatively impacted the overall number of Chinese UHNWIs and, while the numbers of affluent millionaires and centimillionaires recovered strongly after the crisis, the number of Chinese billionaires increased at a much slower rate during the remainder of the review period. Table 12: Chinese UHNWIs Volume by Type of UHNWI, Type of HNWI CAGR Billionaires XX.X XX.X XX.X XXX.X XXX.X X Centimillionaires X,XXX.X X,XXX.X X,XXX.X X,XXX.X X,XXX.X X Affluent millionaires X,XXX.X X,XXX.X X,XXX.X X,XXX.X X,XXX.X X Total Volume of UHNWIs X,XXX.X X,XXX.X X,XXX.X X,XXX.X X,XXX.X X Figure 11: Chinese UHNWIs Volume by Type of UHNWI, ,000 7,000 6,000 5,000 4,000 3,000 2,000 1, Affluent Millionaires Centimillionaires Billionaires Page 14

15 MARKET SIZE AND GROWTH POTENTIAL OF CHINESE WEALTH MANAGEMENT CUSTOMERS Over the forecast period, all categories of UHNWIs are expected to record strong growth, with the growth in the number of Chinese billionaires expected to outpace the growth in the number of the country s affluent millionaires and centimillionaires. Overall, the Chinese UHNWI population is expected to increase by a total of XX.X% from 2012 to 2016, from X,XXX.X in 2011 to a projected total of XX,XXX.X in 2016, and record a CAGR of X over the forecast period. This robust growth is anticipated to be led by an anticipated XX.X% increase in the number of Chinese billionaires and a XX.X% projected increase in the number of centimillionaires in the country over the forecast period. Table 13: Chinese UHNWIs Volume by Type of UHNWI, Type of HNWI CAGR Billionaires XXX.X XXX.X XXX.X XXX.X XXX.X X Centimillionaires X,XXX.X X,XXX.X X,XXX.X X,XXX.X X,XXX.X X Affluent millionaires X,XXX.X X,XXX.X X,XXX.X X,XXX.X XX,XXX.X X Total Volume of UHNWIs X,XXX.X XX,XXX.X XX,XXX.X XX,XXX.X XX,XXX.X X Figure 12: Chinese UHNWIs Volume by Type of UHNWI, ,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2, Affluent Millionaires Centimillionaires Billionaires Page 15

16 MARKET SIZE AND GROWTH POTENTIAL OF CHINESE WEALTH MANAGEMENT CUSTOMERS Demographic breakdown of Chinese Ultra HNWIs by region The majority of China s UHNWIs almost XX% live in the three major Tier I areas of the YRD (Yangtze River Delta), BER (Bohai Economic Rim) and PRD (Pearl River Delta). However, while, like most of the country s HNWIs, the majority of China s UHNWIs live in Tier I regions, there are also sizeable UHNWI populations in rapidly growing economic regions in other parts of China. Within the wealth bands, it is interesting to note that billionaires have a very high concentration in Guangdong, with the region accounting for roughly a quarter of Chinese billionaires. Figure 15: Chinese UHNWIs Regional Distribution (% Share), 2011 Rest of China Yangtze River Delta (YRD) Bohai Economic Rim (BER) Page 16

17 MARKET SIZE AND GROWTH POTENTIAL OF CHINESE WEALTH MANAGEMENT CUSTOMERS The core high-net-worth individuals (core HNWIs) As their name implies, core millionaires, a group that includes mid-tier and lower-tier millionaires, form not only the base of China s wealth pyramid, but also account for over XX% of the country s total HNWI volumes and approximately XX% of its HNWI wealth. The group also shares some notable demographic characteristics, being generally younger and more likely to have earned their wealth than China s overall HNWI population. Furthermore, core millionaires traditionally hold large portions of their wealth in cash and other low risk products and build their savings to acquire real estate, in which they hold a high proportion of their wealth. Notably, many Chinese core millionaires would also like to grow their wealth through investments and would benefit from professional advice, making this group a vital market for wealth management companies operating in China. Moreover, as core millionaires form the base of China s wealth pyramid, an understanding of their unique dynamics is essential for wealth management success in the country. Volume of core HNWIs During the review period, the number of Chinese core millionaires increased at a CAGR of, rising from XXX,XXX in 2007 to X,XXX,XXX in Interestingly, while the number of mid-tier millionaires in the country grew at a faster rate than the number of lower-tier millionaires, neither grew as fast as the volume of UHNWIs. Table 16: Chinese Core HNWIs Volume by Type of Core HNWI, Type of HNWI CAGR Mid-tier millionaires XX,XXX.X XX,XXX.X XX,XXX.X XX,XXX.X XXX,XXX.X X Lower-tier millionaires XXX,XXX.X XXX,XXX.X XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X Total Volume of Core HNWI XXX,XXX.X XXX,XXX.X XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X Figure 16: Chinese Core HNWIs Volume by Type of Core HNWI, ,400,000 1,200,000 1,000, , , , , Lower Tier Millionaires Mid Tier Millionaires Page 17

18 MARKET SIZE AND GROWTH POTENTIAL OF CHINESE WEALTH MANAGEMENT CUSTOMERS Due to China s favorable economic outlook, the number of Chinese core millionaires is expected to grow significantly over the forecast period, with the volume of the group expected to record a CAGR of X from 2012 to Overall, the number of Chinese core millionaires is expected to reach more than X,XXX,XXX by Table 17: Chinese Core HNWIs Volume by Type of Core HNWI, Type of HNWI CAGR Mid-tier millionaires Lower-tier millionaires XXX,XXX.X XXX,XXX.X XXX,XXX.X XXX,XXX.X XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X X X Total Volume of Core HNWI X,XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X X Figure 17: Chinese Core HNWIs Volume by Type of Core HNWI, ,000,000 2,500,000 2,000,000 1,500,000 1,000, , Lower Tier Millionaires Mid Tier Millionaires Page 18

19 MARKET SIZE AND GROWTH POTENTIAL OF CHINESE WEALTH MANAGEMENT CUSTOMERS 3.2 HNWI Investments by Asset Class BRICdata defines wealth as the net value of assets, including both financial holdings and tangible items. As such, and in the interests of providing the most comprehensive possible analysis of China s HNWI wealth, BRICdata has attempted to calibrate the total wealth held by China s HNWI across five major asset classes alternatives, real estate, cash and deposits, fixed income, equity and business interests. Additionally, liquid and investable assets were analyzed, so as to provide further insight into China s HNWI population and the opportunities it presents for wealth managers and private bankers operating in the country. Liquid assets are made up of cash and deposits, fixed income and equities, while investable assets include all assets except for business interests. Figure 20: Asset Class Composition (% Share), % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Total Alternatives Total Real Estate Total Cash/Deposits Total Fixed Income Total Equities Business Interests Page 19

20 APPENDIX 4 Appendix 4.1 About BRICdata BRICdata publishes in-depth strategic intelligence reports that help its customers better understand opportunities in emerging markets and industry sectors. Its reports provide an independent, expert view supported by primary research and access to leading data and intelligence sources. BRICdata is a comprehensive source of insights and analysis, and publishes a broad range of reports across a number of different industry sectors, including consumer, retail, financial services, technology, telecoms and construction. BRICdata is headquartered in London with research, analysis and account management teams based across Europe, the US and Asia-Pacific. Its global research footprint is supported by a network of external associates, data partners and industry experts to give the clearest possible perspective on emerging markets Definitions For the purposes of this report, the following timeframes apply: Review period: Forecast period: Table 28: Definitions HNWIs UHNWIs Core HNWIs Billionaires Centimillionaires Affluent Millionaires Mid-Tier Millionaires Lower-Tier Millionaires Source: BRICdata analysis The high-net-worth-individuals (HNWIs) wealth band comprises all types of HNWIs. It represents individuals that hold assets of US$1 million or more in equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. The ultra-high-net-worth-individuals (UHNWIs) wealth band comprises the billionaire, centimillionaire and affluent millionaire types of HNWIs. It represents individuals that hold assets of US$30 million or more in equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. The core millionaires HNWI wealth band comprises the mid-tier millionaire and lower-tier millionaire types of HNWIs. It represents individuals that hold assets of US$1 30 million in equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. Billionaires are HNWIs that hold investable assets of US$1 billion or more in equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. Centimillionaires are HNWIs that hold assets between US$100 million and US$1 billion in equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. Affluent millionaires are HNWIs that hold assets of US$ million in equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. Mid-tier millionaires are HNWIs that hold assets of US$5 30 million in equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. Lower-tier millionaires are HNWIs that hold assets of US$1 5 million in equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests. Page 20

21 APPENDIX Areas of expertise BRICdata operates a dedicated, multilingual team of in-house industry analysts with significant experience of global and country-level research. BRICdata also maintains data and research partnerships with other research companies, industry experts and trade associations, along with a network of independent industry consultants and former industry participants contributing research and reports to bring additional insight and expertise in more specialist areas. BRICdata s research offering spans the following industry areas: Construction BRICdata publishes reports covering the entire construction value chain: construction materials, equipment, construction services, architectural services and interior design. It also covers the main value sectors of construction activity: commercial, infrastructure, industrial, institutional and residential. This comprehensive view of the market enables BRICdata to detail key growth sectors and countries and identify the most attractive industry opportunities. Consumer goods Covering a broad range of areas across the consumer goods market, from interior products to fast-moving consumer goods (FMCG), ingredients, and packaging, BRICdata offers a comprehensive insight into key consumer sectors across fast-growing markets, identifying key trends, future innovations and growth opportunities. Comprehensive data sets including unique primary survey-driven research creates accurate market forecasts and understanding of the factors driving consumption behavior. Financial services Providing detailed insights into insurance and banking markets, BRICdata s financial services reports identify key market opportunities, emerging technologies and channel strategies. The reports provide unique data combined with local examples of best practice and expert insights into the market. Retail BRICdata maintains a comprehensive database of forecasts of retail spending, along with a series of unique indicators enabling a forward view of retailers prospects in emerging markets. The reports identify emerging concepts in retail, including the nascent online and mobile retail sectors in the BRIC countries and other emerging markets. Technology BRICdata tracks key trends and innovations, emerging technologies and markets, and the key operators in both emerging markets and technologies. Covering a range of emerging and disruptive technologies including telecoms, social media, online and mobile retailing, and telemedicine, BRICdata examines strategies for success, the state of the competitive landscape and the inherent threats and opportunities in the emerging technological economy. 4.2 Methodology All BRICdata reports are rigorously sourced and created according to a comprehensive, two-stage methodology. This includes internal audit and primary research. A) Internal audit Review of in-house databases to gather existing data: o Historic market databases and reports o Company database o projects database B) Primary research Review of the latest company strategy and asset management trends Page 21

22 APPENDIX 1) Research A. Sources Collection of the latest market-specific data from a wide variety of industry sources: o Government statistics o Industry associations o Company filings o Broker reports o International organizations B. Expert opinion Collation of opinion taken from leading industry experts Analysis of third-party opinion and forecasts: o Broker reports o Industry associations o Official government sources C. Data consolidation and verification Consolidation of data and opinion to create historical datasets Creation of models to benchmark data across sectors and geographies 2) Research Analysis 3) Report Writing Market forecasts Feed of forecast data into market models: o Macroeconomic indicators o Industry-specific drivers Analysis of Market Databases to identify trends by sector: o Latest trends o Key drivers of the market Analysis of market data Discussion of company and industry trends and issues Integration of survey results Annual review of trends Standardization of market definitions using recognized industry classifications 4) Quality Control A. Templates Detailed process manuals Standardized report templates and accompanying style guides Complex forecasting tool used to ensure forecast methodologies are consistently applied QC checklists B. QC process Peer review Senior-level QC Random spot checks on data integrity Benchmark checks across databases Market data cross-checked for consistency with accumulated data from company filings Page 22

23 APPENDIX 4.3 Disclaimer All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, BRICdata. The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions and recommendations that BRICdata delivers will be based on information gathered in good faith from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. BRICdata can, therefore, accept no liability whatsoever for actions taken based on any information that may subsequently prove to be incorrect. Page 23