Millionaires' row gets longer
According to the Hurun Report, which tracks the rising fortunes of individuals on the mainland, China had the world's fastest-growing group of millionaires last year. The number rose 31 per cent from 2008 to include almost 500,000 people.
Among the millionaires are 55,000 super-rich individuals, defined as those with 100 million yuan (HK$115 million). This marked a rise of about 8 per cent from the previous year. Among them, 1,900 have 1billion yuan and 140 have 10 billion yuan.
Beijing is home to more of the mainland's rich than anywhere else, with 151,000 millionaires. Guangdong occupies second position and Shanghai is third.
"The growth in the number of Chinese millionaires has been driven by a rise in property prices, especially luxury property, the recovery of the stock market and a generally strong Chinese economy. At the same time, there is a great deal of hidden wealth in the Chinese economy, with a significant number of low-key billionaires keeping their heads below the parapet," says Rupert Hoogewerf, founder of the Hurun Report.
Yim Lok, head of north Asia at Deutsche Bank Private Wealth Management, agrees. "The size of the mainland high-net-worth market is enormous, as are the opportunities, but there are also risks involved," he says.
It is easy to oversimplify and generalise when talking about the rapid growth and immense size of new wealth. "It is difficult to define an overall trend. The levels of maturity, sophistication and investment preferences vary widely," Yim says.
Five or six years ago, he says, there was a tendency to believe that mainland high-net-worth individuals mainly invested in one type of asset class such as equities. However, this has significantly changed. These days, they are looking at investment diversification in different jurisdictions.
"There is an expanding class of wealthy people who are really keen to learn and grasp new opportunities. They look at what's being offered in other markets where many of them have business interests and ask: `Why is this not available in China?'" Yim says.
In a similar way that government-owned companies have expanded outside China, wealthy Chinese people are looking for investment opportunities beyond its borders.
"Even though there is a move towards diversification, there is still a marked difference between the private banking concepts of diversifying assets to mitigate risk that are understood in developed markets. The main difference is that diversification is being driven by the search for investment opportunity rather than asset allocation and portfolio risk management," Yim says. Deutsche Bank will focus on market segments where it can leverage on its key strengths, Yim says. These include providing clients with a range of corporate banking and wealth-management solutions.
"We have a well-established presence in China, where we are providing our clients with the same financial services we offer throughout the world," Yim says.
Even though the mainland has been gradually easing controls on its banking industry since its accession to the World Trade Organisation in 2001, there are few incentives for Hong Kong-based boutique banks to expand their operations over the border.
According to Cynthia Lee Sze-wing, executive director of the wealth advisory group at JP Morgan Private Bank, the mainland's high-net-worth individuals are also looking for ways to preserve their wealth for future generations.
"We see more clients looking for ways to transfer wealth beyond their own generation in an orderly fashion. They are setting up offshore trusts, investment holding companies and, to some extent, insurance. We also see a rise in the need for solutions to deal with cross-border investments and taxation issues," Lee says.
"We also have clients who are seeking expertise in investment strategies for their philanthropic goals and are deploying sizeable amounts through charitable vehicles, such as foundations or trusts, to pass on their legacy to future generations."