China's moderate wealthy 'will have double the cash of US counterparts by 2020'

Nation’s moderately wealthy will be worth twice as much as US counterparts by 2020

PUBLISHED : Tuesday, 24 March, 2015, 4:26pm
UPDATED : Wednesday, 08 April, 2015, 4:17pm

The total wealth held by China’s moderately wealthy – households with financial assets of between US$100,000 to US$2 million – will be double that of their American counterparts in 2020, a study shows.

The United States topped the list last year with households from this wealth segment holding US$23 trillion in financial assets, according to an Economist Intelligence Unit global report sponsored by Citi.

The report, which measured the trend in 32 countries, says this group – which it calls “the new wealth builders” (NWBs) – is the world’s fastest growing wealth segment. China occupied second place in last year’s report when the nation’s NWB assets amounted to US$19.5 trillion.

But the Economist Intelligence Unit forecasts that the US will soon cede the top spot to China. This wealth segment will grow faster in the world’s second-largest economy because of its population advantage and a rate of economic growth fuelled by the loosening of monetary and fiscal policy, the report said.

NWB assets in China were expected to soar to US$53 trillion in 2020, almost double the US in second place with total assets of US$27 trillion.

The average wealth per NWB household in the US (US$491,000) will still maintain a lead over China (US$319,000), however, the report said.

NWBs typically do not consider themselves wealthy, and their wealth is earned, not inherited, it said. “They are charitable … and invest with a conscience.”

David Wu, who owns two cement plants in Jiangsu  , said he hoped his wealth would grow at a steady pace in the coming years, rather than rapidly, to avoid excessive risk.

His plants are being transformed to treat household garbage and sewage sludge, in response to Beijing’s call to develop the environmental protection industry. Wu, 40, said he was looking for investment opportunities in growth companies ahead of their initial public offerings.

“If you want to make big money quickly, the mainland is a good choice,” he said, “But if you want steady growth, you should probably look elsewhere.”

He said he had invested a third of his wealth overseas through mutual funds, insurance products and banks’ wealth management products.

“These products invest in assets in the US, Britain, Germany and Singapore – places where I have more confidence in their legal environments,” he said.

Jonathan Larsen, Citi global head of retail banking and head of consumer banking for Asia Pacific, said: “NWBs represent an increasingly important phenomenon in the world economy, driving growth in savings and economic activity more generally.”

Last year, according to the report, the global NWB segment was worth more than US$88 trillion, double the US$43 trillion of the high-net-worth segment, which covers those with more than US$2 million.