Number of rich in China to grow at faster pace

PUBLISHED : Thursday, 15 November, 2012, 9:57pm
UPDATED : Thursday, 15 November, 2012, 9:59pm

The number of rich people in China is expected to grow at an even faster pace through to 2015 than that of the past three years, and they are increasingly looking to shift their wealth abroad.

Interestingly, while most people think China’s rich may want to shift assets abroad for reasons pertaining to immigration or an offspring’s education, a joint report by McKinsey & Company and Minsheng Banking found that they were in fact looking for risk diversification and a wider range of investment products.

The number of China’s high net worth individuals (HNWI) – those with investable finance in excess of 6.5 million yuan (HK$8 million) – will grow by 20 per cent annually to nearly 2 million by 2015, according to the report. The number grew 15 per cent annually from 2010 to this year.

The number of the so-called ultra HNWI, whose investable finance exceeds 100 million yuan, would double to nearly 130,000 by 2015, twice that of the this year level, according to the report.

More than 30 per cent of the assets of rich Chinese are in real estate, a traditional investment tool available to them when local equity markets generate poor returns and the choice of other investment products is limited in China.

However, as China introduces measures to curb the property market and the golden period of housing market returns appears to have ended, investors are shifting their focus elsewhere.

Private equity products should overtake real estate as the most popular place to park the assets of this rich class in the next five years, according to the report.

Overseas products are another important alternative as these products currently represent a relatively small portion – 10 per cent – of rich Chinese people’s total investment portfolios.

Around 60 per cent of China’s rich own overseas investments, according to the report, which polled 700 HNWIs or ultra HNWIs from 29 major Chinese cities. Immigration was cited as a reason for investing overseas by only 23 per cent of respondents; children’s education was a reason for only 16 per cent.

Risk diversification was the major reason for 86 per cent of respondents; 76 per cent of them wanted access to a wider range of investment products.

Under no illusions about the relatively dire state of the global economy, only 15 per cent said they were hoping for a higher return overseas than that which is available in China.

Revenue from China’s private banking business is expected to grow from 23.3 billion yuan in 2010 to 46.8 billion yuan by 2015, the report said.

The majority of the rich people in the group cited were middle-aged and either company founders or managers, according to the report.

Geographically, 40 per cent are located in the Pearl River Delta, 31 per cent are in the Yangtze River Delta, while another 11 per cent are in the Bohai region.