2015-09-01-Bain-The_evolution_of_China_s_private_wealth_market_20页_6mb

Summary of The Evolution of China's Private Wealth Market

Core Content

This report by Bain & Company and China Merchants Bank (CMB) provides an in-depth analysis of the growth and evolution of China's private wealth market, focusing on the behavior and preferences of high-net-worth individuals (HNWIs). It highlights the increasing importance of private wealth management in the context of China's economic development and the changing priorities of its wealthy population.

Main Findings

• Market Growth:
  The total private wealth market in China surpassed RMB 100 trillion in 2014, reaching RMB 112 trillion. It is expected to grow to RMB 129 trillion in 2015, with an annual growth rate of 16% from 2012 to 2014.

  • The number of HNWIs (individuals with investable assets exceeding RMB 10 million) exceeded one million in 2014, growing at a compounded annual rate of 21% between 2012 and 2014.

• Geographic Distribution:

  • Seven provinces (Guangdong, Shanghai, Beijing, Jiangsu, Zhejiang, Shandong, and Sichuan) account for over 50,000 HNWIs each.
  • Guangdong has more than 100,000 HNWIs, while Sichuan is the first inland province to exceed 50,000.
  • Central and Western provinces have shown the most significant growth in HNWI numbers, contributing to a more balanced wealth distribution.

• Investment Trends:

  • Innovative Industries: The rise of IT, biotechnology, and alternative energy has led to the emergence of the "newly rich" segment, who are younger and more aggressive in their investment approach.
  • Wealth Preservation: This remains the top wealth management objective for HNWIs, followed closely by wealth inheritance planning, which has risen from the fifth priority in 2013 to the second in 2015.
  • Overseas Investment: Interest in overseas investments is increasing, with nearly 40% of HNWIs and almost 60% of ultra-HNWIs having such investments. Over half of HNWIs plan to increase overseas investments in the next two years.
  • Online Channels: While HNWIs still prefer offline personalized services, they are increasingly using online platforms, especially mobile Internet, for investment information and banking services.

• Private Banking Landscape:

  • Chinese private banks are the preferred choice for HNWIs' onshore wealth management needs.
  • They are investing heavily to enhance cross-border capabilities to meet the growing demand for overseas investment services.
  • Key Selection Criteria: Brand, expertise, and service are the most important factors for HNWIs when choosing wealth management institutions. Ultra-HNWIs place even greater emphasis on expertise.
  • Competitive Dynamics: Other wealth management providers (e.g., fund management companies, trust institutions) compete mainly on product offerings and distribution channels.
  • Convenience and Cultural Factors: For HNWIs using overseas investments for diversification and returns, convenience, Chinese language support, and cultural connections are significant considerations.

Key Insights

• The "newly rich" segment is reshaping the investment landscape in China, favoring innovation and risk-taking.
• Wealth preservation is a dominant priority, but wealth inheritance planning is gaining traction, especially among ultra-HNWIs.
• The geographic distribution of wealth is becoming more balanced, driven by growth in Central and Western provinces.
• Private banks are adapting to meet the evolving needs of HNWIs by enhancing their services and expanding overseas platforms.
• Online investment tools are becoming more accepted, particularly among younger HNWIs.

Methodology

The report uses a comprehensive sizing model to estimate the private wealth market, which includes:

1. Estimating individual investable assets based on market value and real estate holdings.
2. Calculating income and wealth distribution curves using provincial and regional data.
3. Deriving the relationship between income and wealth distribution among Chinese HNWIs.
4. Combining data from CMB's private customers with global wealth distribution statistics to form the final wealth distribution curve.

Authors and Contact Information

• Authors: Jennifer Zeng, Alfred Shang, and Sameer Chishty (Bain & Company)
• Contact:
  • Jennifer Zeng: jennifer.zeng@bain.com (Beijing)
  • Alfred Shang: alfred.shang@bain.com (Beijing)
  • Sameer Chishty: sameer.chishty@bain.com (Hong Kong)

For a full copy of the report, contact the authors directly.

About Bain & Company

• Bain is a global management consulting firm with 51 offices in 33 countries.
• It has a strong presence in Greater China, with offices in Beijing, Shanghai, and Hong Kong.
• Bain has over 200 consultants with extensive experience in China and globally.
• The firm is known for its Results Delivery® process and commitment to True North values, ensuring that its advice aligns with client outcomes and ethical standards.

Conclusion

China's private wealth market is expanding rapidly, driven by economic reforms, the rise of innovative industries, and a growing HNWI population. As wealth becomes more widespread, private banks and wealth management institutions must adapt to shifting preferences, enhance cross-border capabilities, and provide both personalized and digital services to remain competitive. The newly rich are playing an increasingly important role in this transformation, influencing investment trends and reshaping the market's future direction.