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This Latest Report Released Jointly by The Boston Consulting Group and the China Construction Bank Highlights that the Chinese Wealth Market Continues to Be a Bright Spot on the Global Wealth Landscape. By the End of 2011, the Total Amount of Investable Assets Held by Chinese Individuals Will Reach RMB 62 Trillion, and the Number of High-Net-Worth Households Will Reach 1.21 Million.

Given that China’s private-banking industry is still in its initial stage of development, the report calls on the industry to seize the opportunity to lead market growth by listening to clients and being proactive, innovative, and forward-looking.

Beijing, December 22, 2011— A report jointly released today by The Boston Consulting Group (BCG) and the China Construction Bank (CCB) claims that China’s wealth market continued to grow in 2011 despite global economic uncertainties.

By the end of 2011, the total amount of investable assets held by Chinese individuals will reach RMB 62 trillion, or approximately $9.8 trillion, which represents a compound annual growth rate of 32 percent for the past three years. Of that RMB 62 trillion, RMB 27 trillion will be held by high-net-worth (HNW) households, each of which has at least RMB 6 million in investable assets. At the same time, the total number of Chinese HNW households is set to reach 1.21 million by the end of 2011, having grown at a rate of 42 percent over the past three years.  

BCG and CCB have collaborated to assess China’s wealth market and the key characteristics of its affluent population by modeling the present and future of China’s wealth market, conducting a survey of more than 2,000 HNW individuals, and interviewing a number of private-bank relationship managers. As a result, this report aims to provide insights on the profile of China’s private-banking clients and other findings on China’s wealth market.

Foremost among them is that China’s major municipalities and provinces along the eastern seaboard, including Beijing, Shanghai, Guangdong, and Shenzhen, continue to have and attract an affluent population. Meanwhile, a large number of HNW households are also in Sichuan, Shanxi, Liaoning, Henan, Hebei, Shaanxi, Hubei, Hunan, and Fujian. There are 15 provinces in the country that have more than 20,000 HNW households each. The top ten provinces have close to 70 percent of all HNW households in China; Beijing, Shanghai, and Guangdong account for as much as 35 percent.

Wealth is also spreading rapidly across key parts of the country to regions including Shanxi, which is rich in natural resources, and Hainan, which is prospering due to a boom in travel. Gansu, Anhui, and Guizhou are seeing the fastest growth in the number of HNW households.

The report also reveals that close to 60 percent of China’s HNW individuals are private entrepreneurs who started their own businesses and became wealthy. The BCG/CCB survey reveals that very few HNW individuals have a sufficient understanding of private banking and the products and services it offers. Further, HNW individuals appear to prioritize wealth preservation and sustaining their way of life and educating their children, but they increasingly recognize the importance of being socially responsible.

Other major findings of this report include the following:

• Close to half of China’s private entrepreneurs cited their ability to leverage natural resources as their core competency for amassing wealth, while others thought it was their management and marketing skills.
• Many of China’s HNW individuals are concerned about preserving their wealth. When asked how they plan to use their wealth, close to half said that they would “guarantee their immediate family’s security”. Those who are better educated feel a greater sense of social responsibility—20% of HNW individuals with doctoral degree plan to use their wealth “for the benefits of the society”.
• Forty-eight percent of the wealthy feel that “planning for their children’s future” is more important than “making further improvements in their careers” (44%) and “seeking high-quality lives” (40%). This indicates that the HNW individuals in China attach great importance to the education of their children.
• About 60 percent of HNW individuals tend to tolerate moderate risks, about one-third describe themselves as risk averse, and only 8 percent are willing to accept bigger risks for higher returns. In total, about half of the investable assets of HNW individuals are allocated to moderate- or high-risk assets.
• HNW individuals tend to have only a rudimentary understanding of private-banking services: about half have a conceptual knowledge of private banks or have at least heard of private banks. For these individuals, customized and priority banking services are the most important functions a private bank can provide. In fact, these services are more important than investment products and advisory services.
• When selecting investment products, China’s HNW individuals are most interested in fixed-income products (57%) and trust products (53%).
• HNW individuals consider access to exclusive services in branches very important. Two-thirds believe a “private meeting room” and a “dedicated service counter” are essential. Most care little about a bank’s décor, the availability of expensive tea and drinks, entertainment facilities, access to the Internet, and other perks.
• Almost half of HNW individuals are preparing to transfer their wealth to the next generation or have already done so, indicating that wealth inheritance will become increasingly important in the future. Many “second-generation wealth inheritors” have become professional investors who have a higher tolerance for risk and a preference for more complicated investment products. They also expect more from private banks.
• The demand for offshore products increases with wealth. Most of these clients can be found in tier 1 cities and along the coastal regions. Of those with more than RMB 50 million in assets, 22 percent have already used offshore products and services. Of those individuals with more than RMB 300 million in assets, about 75% expect more exposure to offshore products and services in the future.
• A single bank’s wallet share of a Chinese HNW client is about 20 percent. In other words, a  customer with RMB 10 million of AuM in a bank may have as much as RMB 50 million of total investable assets. Banks should aim to increase share of wallet of their clients. 
   

The report calls on China’s private banks to spend more time listening to their clients in order to build long-term relationships and client loyalty. As clients seek more sophisticated products and services, private banks should leverage their institutional resources.

The report also says that China’s private banks—acting as service providers, wealth managers, and investment advisors—are in the enviable position of being able to take a leadership role and seize a competitive advantage. A key strategic choice for China’s private banks is to lead, rather than follow, market developments—to be proactive, innovative, and forward-looking.

As Chinese entrepreneurs increasingly look abroad to grow and expand their business, offshore private-banking services are growing in demand. The report notes that Chinese commercial banks should start preparing for this by testing the ground in Hong Kong, with its well-established legal, accounting, and regulatory infrastructure. Commercial banks that are interested in building stronger offshore wealth-management capabilities for the long term should begin today.

In this report, all current and forecasted results relating to the size and regional distribution of China’s wealth were generated by BCG’s proprietary market-sizing model. This model leverages on data from a broad range of sources. The top-down modeling uses historical data regarding national wealth accounts and regional wealth distribution. The results of this modeling have been further refined using additional data sources to ensure accuracy and objectivity.

About China Construction Bank

China Construction Bank (CCB) is one of the largest commercial banks in China. Headquartered in Beijing, CCB had 13,442 branches across China by mid-2011 as well as a number of representative offices and subsidiaries across the world. It has approximately 310,000 employees.

CCB Private Bank was established on July 18, 2008, to serve clients with investable assets exceeding RMB 6 million. CCB Private Bank aims to provide solutions that meet the financial needs of individuals, their families, and their enterprises. It emphasizes professionalism of services, protection of privacy, financial stability, and operational efficiency. CCB Private Bank has set up more than 200 private-banking and wealth-management centers across China and promotes its private-banking services across its large retail branch network. It currently operates CCB (Asia) Hong Kong Private Bank and is expanding its overseas private-banking services.

About The Boston Consulting Group

The Boston Consulting Group (BCG) is a global management consulting firm and the world’s leading advisor on business strategy. We partner with clients from the private, public, and not-for-profit sectors in all regions to identify their highest-value opportunities, address their most critical challenges, and transform their enterprises. Our customized approach combines deep insight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 74 offices in 42 countries. For more information, please visit bcg.com.

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To inquire about this report, please contact the following:

China Construction Bank Wealth Management and Private Banking Department
Ms. Yan Lan
Tel: +86 10 6759 6394
Email: yanlan.zh@ccb.com

The Boston Consulting Group
Ms. Gu Li
Tel: +86 21 2306 4069
Email: gu.li@bcg.com