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Emerging Opportunities in

the Chinese Wealth

Management Industry:

Market Size, Strategies,

Products and Competitive

Landscape

Industry Forecast Report

Reference code: IS2016MR

Published: June 2012

BRICdata

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7 Carmelite Street

London EC4Y 0BS

United Kingdom

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Fax: +44 (0) 20 7336 6813

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EXECUTIVE SUMMARY

Emerging Opportunities in Chinese Wealth Management Industry: Market Size, Strategies, Products, and

Competitive Landscape

© BRICdata. This product is licensed and is not to be photocopied Published: June 2012

1 Executive Summary

China’s GDP recorded strong annual growth of X.X% in 2011, growth that is expected to continue over the forecast period.

This makes the country an attractive investment location for wealth management firms. Moreover, China has the main

components that comprise a high-growth wealth management market, including a very large and young affluent customer

base, an improving wealth situation among the global Chinese population, a governmental desire to more tightly regulate

the country’s financial services, and an increasing share of organized companies as compared to the unorganized

workforce.

Wealth and volume of HNWIs is expected to double over the forecast period

China currently has the second-largest number of high-net-worth-individuals (HNWIs) in the Asia-Pacific region, after

Japan. There were X,XXX,XXX HNWIs in China in 2011, who cumulatively owned assets that valued US$X.X trillion. The

volume of HNWIs in China increased at a compound annual growth rate (CAGR) of X.XX% during the review period

(2007–2011), while the total wealth of China’s HNWIs recorded a CAGR of X.XX% during the review period. These figures

are particularly impressive as they include the adverse impact of the global financial crisis, when total HNWI wealth fell by

XX% in 2008 and the number of HNWIs worldwide fell by XX%. In China however, the wealth and volume of HNWIs

recovered rapidly, with total HNWI wealth in the country recording an annual growth of XX% in 2009 and the volume of

HNWIs in the country increasing by XX% in the same year. Over the forecast period (2012–2016), the wealth and volume

of HNWIs in the country is expected to continue to increase strongly, with the number of Chinese HNWIs projected to

reach X,XXX,XXX individuals by 2016 and total Chinese HNWI wealth expected to value US$X.X trillion in the same year.

Chinese HNWIs expected to increase their investment in equities, alternative wealth products and collectable

assets

The popularity of alternative asset holdings has increased dramatically over the past two years, growth that is expected to

continue into the forecast period and help the share of alternatives within total HNWI assets to increase from X.X% in

2011 to X.X% in 2016. This increase is expected to be driven by significant growth in hedge funds, private equity,

collectables and index linked funds. Moreover, a shift from cash into equities is also anticipated, with equity allocations as

a percentage of total assets expected to rise from their current level of XX% to reach XX% by 2016. Other notable

changes projected include a rise in fixed income investments from X.X% of total assets in 2011 to X.X% in 2015; an

increase that is expected to be driven by significant development of the local corporate bond market, which is expected to

grow by over XX% per annum during the forecast period.

Rising demand for investment advisory services among China’s HNWIs

China’s HNWIs provide strong growth prospects for the country’s wealth management firms and private banks, as there is

currently a relatively low penetration of financial services in China. To be successful, financial service providers must take

into account the specific needs, traditional conservatism and unique attitudes towards family wealth prevalent among

Chinese HNWIs. Furthermore, the large number of newly wealthy Chinese HNWIs is the prime target for wealth

management companies. Due to this increasing demand for investment advisory services, most commercial banks and

wealth management companies in China have begun to offer a personal relationship manager to their privileged clients.

Finally, there is particularly strong potential in the provision of the family office model and bespoke offshore services.

Increased regulation may streamline China’s wealth management and private banking industry

As a result of the ongoing political developments regarding the regulation of both China’s overall financial sector and the

country’s wealth management industry, BRICdata research believes that increased regulation of the industry is highly

probable over the forecast period. Furthermore, research suggests that such regulation will have a positive impact on the

industry as it clarifies and streamlines taxation and the country’s financial regulatory structure.

Marketing strategies of commercial banks and private wealth management companies

Commercial banks, private wealth management companies and asset management companies are adopting various

marketing strategies in order to become successful in the Chinese wealth management industry. Foreign banks, such as

Standard Chartered, tend to spend heavily on media advertising and customer acquisition campaigns; while local

commercial banks tend to build strategic partnerships with local and foreign asset management companies in order to

offer a better quality of service. Some notable examples of this include Minsheng Royal Fund Management Company,

which is XX% owned by China Minsheng Bank, XX% owned by Royal Bank of Canada, and XX% owned by Three Gorges

Finance Company; Natixis Banking Group, which was formed through a joint venture between the bank and ICBC; and

Ping An Securities, which was formed by a joint venture between UOB and Ping AN Insurance. ICBC, Bank of China,

China Banking Corporation, Standard Chartered, China Merchant Bank, Weir & Associates and other domestic and

foreign banks provide a number of wealth management services to the country’s HNWIs, such as portfolio management,

trust and estate planning, investment management, and tax advisory services.

EXECUTIVE SUMMARY




Competition expected to intensify with the arrival of foreign companies

Unsurprisingly, the Chinese wealth management market is currently highly fragmented as a result of it being in an early

stage of development. Moreover, the country’s organized service providers, such as commercial banks and wealth

management companies, have thus far predominantly focused on China’s urban population, neglecting a potentially

lucrative customer base of HNWIs that reside in rural areas. With research indicating that this rural HNWI population could

account for as much as a fifth of the country’s total HNWI population, this group could provide significant business

opportunities for new wealth management companies entering the Chinese market. Finally, the inflow of foreign wealth

management providers has forced domestic companies to become more competitive, and compelled domestic banks,

brokerage houses and new entrants to develop their wealth management service offerings.

TABLE OF CONTENTS




TABLE OF CONTENTS

1 Executive Summary ................................................................................................................................ 2 2 Chinese Wealth Management Market Environment ............................................................................. 9

2.1 Macroeconomic Fundamentals ................................................................................................................. 9

2.1.1 GDP at constant prices ............................................................................................................................. 9

2.1.2 Inflation rate ............................................................................................................................................. 11

2.1.3 Annual disposable income ...................................................................................................................... 12

2.1.4 Shanghai Stock Exchange market capitalization .................................................................................... 13

2.1.5 Interest rate ............................................................................................................................................. 14

2.2 Regulatory Framework ............................................................................................................................ 15

2.2.1 Banking regulations ................................................................................................................................. 15

2.2.2 Wealth management and related norms ................................................................................................. 15

2.2.3 Regulatory framework on hedge funds ................................................................................................... 15

3 Market Size and Growth Potential of Chinese Wealth Management ................................................ 16

3.1 Market Size of Chinese Wealth Management by HNWIs ....................................................................... 16

3.1.1 High-net-worth-individuals (HNWIs) ........................................................................................................ 17

3.1.2 Ultra-high-net-worth-individuals (UHNWIs) ............................................................................................. 22

3.1.3 The core high-net-worth individuals (core HNWIs) ................................................................................. 27

3.2 HNWI Investments by Asset Class ......................................................................................................... 31

3.2.1 Investment trends in liquid assets — equity, fixed income and cash deposits ....................................... 32

3.2.2 Investment trends in cash and deposits .................................................................................................. 33

3.2.3 Trends in alternative assets .................................................................................................................... 34

3.2.4 Investments in real estate ....................................................................................................................... 36

3.2.5 Investment trends in equity ..................................................................................................................... 38

3.2.6 Trends in art, wine and automobiles ....................................................................................................... 39

4 Wealth Management Services in China .............................................................................................. 40

4.1 Portfolio Management and Portfolio Rebalancing ................................................................................... 41

4.1.1 Bank of China wealth management ........................................................................................................ 41

4.1.2 China Merchant Bank (CMB) Sunflower financial management planning service ................................. 41

4.1.3 Standard Chartered Bank’s investment services .................................................................................... 41

4.2 Trusts and Estate Planning and Management ........................................................................................ 42

4.2.1 China Banking Corporation’s estate planning services........................................................................... 42

4.2.2 Weir & Associates trust and planning company ...................................................................................... 42

4.3 Private Banking and Financing................................................................................................................ 43

4.3.1 ICBC Private Banking Services ............................................................................................................... 43

4.3.2 China Merchant Bank’s Sunflower VIP service ....................................................................................... 43

4.3.3 CitiGold private banking .......................................................................................................................... 44

4.4 Investment Management and Advisory ................................................................................................... 44

4.4.1 ICBC Perfect Match wealth management product .................................................................................. 44

4.4.2 Bank of China’s Zhongyinjifu wealth management investment plan ....................................................... 44

5 Trends and Growth Drivers .................................................................................................................. 45

5.1 HNWIs Shifting Investments from Residential Real Estate as Regulations Cool the Market ................. 45

TABLE OF CONTENTS




5.2 Tax Optimization Products Are Not Currently in High Demand .............................................................. 45

5.3 Increasing Number of HNWIs in China Presents Significant Business Opportunities ............................ 46

5.4 Real GDP Growth Rate ........................................................................................................................... 46

5.5 Chinese Wealth Management Customers are Shifting to Professional Institutions ................................ 47

5.6 Money Lenders are Shifting Their Focus to Wealth Management Products .......................................... 47

5.7 Increasing Number of Wealth Management Institutions in the Chinese Market ..................................... 47

5.8 Emergence of Offshore Wealth Management in China .......................................................................... 47

5.9 Chinese HNWIs Are Using Multiple Wealth Management Institutions .................................................... 48

6 Marketing and Growth Strategies of Chinese Wealth Management Service Providers ................. 49

6.1 Providing Personalized Investment Services .......................................................................................... 49

6.2 Online Wealth Management Services ..................................................................................................... 49

6.3 Mobile Application for Wealth Management Services ............................................................................. 50

6.3.1 Bank of China’s mobile investment management application ................................................................ 50

6.3.2 Bank of Beijing iPhone application for marketing .................................................................................... 50

6.3.3 ICBC exclusive mobile banking wealth management products .............................................................. 50

6.4 Product Diversification ............................................................................................................................. 50

6.5 Partnering with Assets Management Companies ................................................................................... 51

6.6 Utilizing Social Media to Interact With Customers .................................................................................. 51

6.6.1 Chinese banks are using social media platforms to build strong relationships with their customers ..... 51

7 Strategies to Succeed in the Chinese Wealth Management Industry .............................................. 53

7.1 Effective Customer Segmentation ........................................................................................................... 53

7.2 Building an Effective Distribution Strategy .............................................................................................. 54

7.3 Brand Building ......................................................................................................................................... 54

7.4 Identifying Customer Needs to Increase Share of Wallet ....................................................................... 54

7.5 Building Core Competencies ................................................................................................................... 54

7.6 360 Degree View of Investment .............................................................................................................. 55

8 Challenges ............................................................................................................................................. 56

8.1 Underdeveloped Wealth Management Products .................................................................................... 56

8.2 Lack of Expert Professionals in Wealth Management ............................................................................ 56

8.3 Complicated and Cumbersome Tax System ........................................................................................... 57

8.4 Complex Regulatory Structure ................................................................................................................ 57

8.5 Move Away From Self Management ....................................................................................................... 57

8.6 Demand for Intergenerational Wealth Transfer and Younger Clientele .................................................. 57

8.7 Philanthropy............................................................................................................................................. 58

9 Competitive Landscape ........................................................................................................................ 59

9.1 Industry Structure .................................................................................................................................... 59

9.2 Wealth Managers and Private Banks ...................................................................................................... 61

9.2.1 Public sector banks ................................................................................................................................. 61

9.2.2 Wealth managers .................................................................................................................................... 61

9.2.3 Private-sector banks ............................................................................................................................... 61

9.2.4 Foreign banks and MNCs ....................................................................................................................... 61

9.2.5 Joint ventures .......................................................................................................................................... 62

10 Company Profiles .................................................................................................................................. 63

TABLE OF CONTENTS




10.1 Bank of China .......................................................................................................................................... 64

10.1.1 Company overview .................................................................................................................................. 64

10.1.2 Business segmentation ........................................................................................................................... 64

10.2 Agricultural Bank of China Limited .......................................................................................................... 65



10.3 China Construction Bank Corporation ..................................................................................................... 67



10.4 China Merchants Bank Company Limited ............................................................................................... 68



10.5 Ping An Insurance (Group) Company of China Ltd................................................................................. 69



10.6 Non-Banking Investment Management Companies in China ................................................................. 71

10.6.1 China Asset Management (ChinaAMC) .................................................................................................. 71

10.6.2 Credit Suisse China ................................................................................................................................ 71

10.6.3 China CITIC Bank ................................................................................................................................... 71

11 Appendix ................................................................................................................................................ 72

11.1 About BRICdata ...................................................................................................................................... 72

11.1.1 Definitions ................................................................................................................................................ 72

11.1.2 Areas of expertise ................................................................................................................................... 73

11.2 Methodology ............................................................................................................................................ 73

11.3 Disclaimer ................................................................................................................................................ 75

TABLE OF CONTENTS




LIST OF FIGURES

Figure 1: Chinese GDP at Constant Prices (US$ Billion), 2007–2016 (Base Year 1999–2000) ............................................................ 10 Figure 2: Chinese Inflation Rate (%), 2007–2016 ................................................................................................................................... 11 Figure 3: Chinese Annual Disposable Income (US$ Billion), 2007–2016 ............................................................................................. 12 Figure 4: Chinese’s Shanghai Stock Exchange Market Capitalization (US$ Trillion), 2007–2011 ...................................................... 13 Figure 5: China Central Bank Interest Rate (%), September 2009 – July 2011 .................................................................................... 14 Figure 6: Chinese Wealth Management Industry Customers – HNWI Composition ............................................................................ 16 Figure 7: Chinese HNWIs Value by Wealth Band (US$ Billion), 2007–2011 ......................................................................................... 19 Figure 8: Chinese HNWIs Value by Wealth Band (US$ Billion), 2012–2016 ......................................................................................... 20 Figure 9: Chinese HNWIs Regional Distribution (% Share), 2011 ......................................................................................................... 21 Figure 10: Chinese HNWIs Regional Distribution – Key Regions, 2011 ............................................................................................... 21 Figure 11: Chinese UHNWIs Volume by Type of UHNWI, 2007–2011 ................................................................................................... 22 Figure 12: Chinese UHNWIs Volume by Type of UHNWI, 2012–2016 ................................................................................................... 23 Figure 13: Chinese UHNWIs Value by Type of UHNWI (US$ Billion), 2007–2011 ................................................................................. 24 Figure 14: Chinese UHNWIs Value by Type of UHNWI (US$ Billion), 2012–2016 ................................................................................. 25 Figure 15: Chinese UHNWIs Regional Distribution (% Share), 2011 .................................................................................................... 26 Figure 16: Chinese Core HNWIs Volume by Type of Core HNWI, 2007–2011 ...................................................................................... 27 Figure 17: Chinese Core HNWIs Volume by Type of Core HNWI, 2012–2016 ...................................................................................... 28 Figure 18: Chinese Core HNWIs Value by Type of Core HNWI (US$ Billion), 2007–2011 .................................................................... 29 Figure 19: Chinese Core HNWIs Value by Type of Core HNWI (US$ Billion), 2012–2016 .................................................................... 30 Figure 20: Asset Class Composition (% Share), 2007–2016 ................................................................................................................. 31 Figure 21: Chinese HNWI Liquid Asset Composition (US$ Billion), 2007–2016 .................................................................................. 32 Figure 22: HNWIs – Investment in Cash and Deposits (US$ Billion), 2007–2016 ................................................................................ 33 Figure 23: Chinese HNWI – Trends of Investments in Alternative Assets (in US$ Billion), 2007-2011 ............................................. 35 Figure 24:Chinese HNWI – Trends of Investments in Alternative Assets (in US$ Billion), 2012–2016 ............................................... 35 Figure 25: Chinese HNWI Investment in Real Estate (US$ Billion), 2007–2016 ................................................................................... 36 Figure 26: Chinese HNWI Investment in Equities (US$ Billion), 2007–2016......................................................................................... 38 Figure 27: Mercedes-Benz and Porsche* Cars Unit Sales in Chinese Market ..................................................................................... 39 Figure 28: Wealth Management Services In China ................................................................................................................................ 40 Figure 29: Chinese Wealth Management Trends and Growth Drivers ................................................................................................. 45 Figure 30: HNWI – Growth Factor Correlation, 2007-11 ........................................................................................................................ 46 Figure 31: PICC Social Media Platform on Weibo.com ......................................................................................................................... 52 Figure 32: Strategies to Succeed in the Chinese Wealth Management Industry ................................................................................. 53 Figure 33: A Unified View of Customer Investment ............................................................................................................................... 55 Figure 34: Challenges in Chinese Wealth Management ........................................................................................................................ 56 Figure 35: Chinese Wealth Management Industry Structure ................................................................................................................ 60 Figure 36: Major Companies in Chinese Wealth Management Industry .............................................................................................. 63

TABLE OF CONTENTS




LIST OF TABLES

Table 1: Chinese GDP at Constant Prices (US$ Billion), 2007–2016 (Base Year 1999–2000) ............................................................... 9 Table 2: Chinese Inflation Rate (%), 2007–2016 ..................................................................................................................................... 11 Table 3: Chinese Annual Disposable Income (US$ Billion), 2007–2016 ............................................................................................... 12 Table 4: Chinese’s Shanghai Stock Exchange Market Capitalization (US$ Trillion), 2007–2011 ........................................................ 13 Table 5: China Central Bank Interest Rate Changes (%), September 2009 – July 2011 ...................................................................... 14 Table 6: Chinese HNWIs Volume by Wealth Bands, 2007–2011 ........................................................................................................... 17 Table 7: Chinese HNWIs Volume by Wealth Bands, 2007–2011 ........................................................................................................... 18 Table 8: Chinese HNWIs Volume by Wealth Bands, 2012–2016 ........................................................................................................... 18 Table 9: Chinese HNWIs Volume by Wealth Bands, 2012–2016 ........................................................................................................... 18 Table 10: Chinese HNWIs Value by Wealth Band (US$ Billion), 2007–2011 ......................................................................................... 19 Table 11: Chinese HNWIs Value by Wealth Band (US$ Billion), 2012–2016 ......................................................................................... 20 Table 12: Chinese UHNWIs Volume by Type of UHNWI, 2007–2011 ..................................................................................................... 22 Table 13: Chinese UHNWIs Volume by Type of UHNWI, 2012–2016 ..................................................................................................... 23 Table 14: Chinese UHNWIs Value by Type of UHNWI (US$ Billion), 2007–2011 .................................................................................. 24 Table 15: Chinese UHNWIs Value by Type of UHNWI (US$ Billion), 2012–2016 ................................................................................. 25 Table 16: Chinese Core HNWIs Volume by Type of Core HNWI, 2007–2011 ........................................................................................ 27 Table 17: Chinese Core HNWIs Volume by Type of Core HNWI, 2012–2016 ........................................................................................ 28 Table 18: Chinese Core HNWIs Value by Type of Core HNWI (US$ Billion), 2007–2011 ..................................................................... 29 Table 19: Chinese Core HNWIs Value by Type of Core HNWI (US$ Billion), 2012–2016 ..................................................................... 30 Table 20: Chinese HNWI Liquid Asset Composition (%), 2007–2016 ................................................................................................... 32 Table 21: Chinese HNWI – Trends of Investments in Alternative Assets (US$ Billion), 2007–2011 ................................................... 34 Table 22: Chinese HNWI – Trends of Investments in Alternative Assets (US$ Billion), 2007–2011 ................................................... 34 Table 23: Chinese HNWI – Alternative Asset Composition (%), 2007–2016 ......................................................................................... 34 Table 24: Chinese Real GDP Growth Rate (%), 2007–2016 ................................................................................................................... 46 Table 25: ChinaAMC: Main Services ...................................................................................................................................................... 71 Table 26: Credit Suisse China: Main Services ....................................................................................................................................... 71 Table 27: CITIC Bank Corporation Limited: Main Services ................................................................................................................... 71 Table 28: Definitions................................................................................................................................................................................ 72

CHINESE WEALTH MANAGEMENT MARKET ENVIRONMENT




2 Chinese Wealth Management Market Environment

China’s rapid economic growth has led to considerable developments in the country’s banking services and increased

demand for wealth management products. During the review period, the total number of HNWIs in the country increased

from XXX,XXX in 2007 to X,XXX,XXX in 2011, recording a CAGR of X.XX%. Similarly, the total wealth of China’s HNWIs

increased from US$X.X trillion in 2007 to US$X.X trillion in 2011, recording a CAGR of X.XX% during the review period.

2.1 Macroeconomic Fundamentals

China’s economy faced a very complex domestic and international economic environment in 2010, and withstood several

severe natural disasters and challenges. However, the country still recorded rapid growth by consolidating and expanding

the strong results it achieved by overcoming the global economic crisis. Moreover, as the Chinese economy continues to

expand, the country’s banking and financial services companies are expected to introduce more innovative and advanced

wealth management products and services into Chinese wealth management.

2.1.1 Interest rate

After increasing China’s prime interest rate three times in 2011, the Central Bank of China kept the country’s interest rate

unchanged at X.XX% in July 2011. Notably, the central bank lowered China’s prime interest rate several times in 2008 in

an attempt to strengthen the country’s economy in the wake of the global financial crisis.

Table 5: China Central Bank Interest Rate Fluctuations (%), September 2009 – July 2011

Year Repo Rate (%)

September 15, 2008 X.XX%

October 9, 2008 X.XX%


November 21, 2008 X.XX%

December 22, 2008 X.XX%


December 25, 2010 X.XX%

February 8, 2011 X.XX%

April 6, 2011 X.XX%

July 6, 2011 X.XX%

Source: BRICdata analysis © BRICdata

Figure 5: China Central Bank Interest Rate Fluctuations (%), September 2009 – July 2011

Source: National Bureau of Statistics of China and BRICdata analysis © BRICdata

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

15 S

ep

t. 2

008

9 O

ct. 2

008

30 O

ct. 2

008

21 N

ov. 2

008

22 D

ec. 2

008

19 O

ct. 2

010

25 D

ec. 2

010

8 F

eb. 2

011

6 A

pr.

2011

6 J

ul. 2

011

China Central Bank Interest Rates

MARKET SIZE AND GROWTH POTENTIAL OF CHINESE WEALTH

MANAGEMENT CUSTOMERS




3 Market Size and Growth Potential of Chinese Wealth Management

Following the significant impact of the global financial crisis in 2008 and 2009, China’s economy recovered rapidly and

recorded a double-digit GDP growth in 2010. This situation was mirrored in the country’s investment markets, where

strong growth in 2009 and 2010 followed a steep decline in 2008, growth that was driven by an economic stimulus

package of CNYX trillion. The strongest growth was recorded by the Chinese stock and real estate markets, two of the

country’s most important investment markets. Meanwhile, BRICdata research indicated a sizable shift in Chinese HNWI

asset allocation during the same period, as alternative investment vehicles emerged as the new focus for the country’s

HNWI population. These alternative investments included private funds invested in secondary markets created through

trust companies and real estate trusts, along with overseas investments.

By the end of 2011, the total value of investable assets held by individuals in China totaled US$X.X trillion, a XX%

increase over 2010. A detailed analysis of these assets shows that the market value of capital market products recorded a

CAGR of XX% from 2008 to 2010, while China’s net investment property values increased at a CAGR of XX% over the

same period.

Other alternative investments, represented by private equity and private funds invested in secondary markets, recorded a

CAGR of XXX% from 2008 to 2010, emerging as a popular investment option for China’s HNWIs.

3.1 Market Size of Chinese Wealth Management by HNWIs

The Chinese wealth management industry services the country’s upper-income population, which includes high-net-worth-

individuals that have investable assets of US$X.X million or more, excluding their primary residence, collectibles,

consumables and consumer durables.

3.1.1 High-net-worth-individuals (HNWIs)

The substantial economic stimulus package implemented by the Chinese government in the wake of the global financial

crisis significantly increased the correlation between the country’s GDP, real estate, equity markets and corporate

earnings, a development that played a vital role in the number of Chinese HNWIs increasing by approximately XX% from

2007 to 2011. Research also indicates that the relatively modest impact of the global financial crisis on the Chinese

economy and the country’s rapid recovery allowed Chinese wealth creation to continue throughout the review period. For

example, though the volume of Chinese HNWIs declined across all wealth bands in 2008, this was followed by a XX%

annual increase in the number of HNWIs in the country in 2009. Interestingly, while the number of UHNWIs in China grew

at a faster rate than the number of Chinese core millionaires during the review period, it is core millionaires that account

for the vast majority of China’s overall HNWI population and any increase or decline in the country’s UNHWI population

therefore has relatively little impact on its overall HNWI volume. Consequently, the robust increase recorded in China’s

total HNWI population was driven by a strong rise in China’s core millionaire volume that followed strong economic

recovery and asset class growth in 2009 and 2010, as well as a more modest than anticipated decline in real estate prices

in 2009.

The total volume of Chinese HNWIs is expected to record a CAGR of XX.XX% over the forecast period, to reach a

projected total of X,XXX,XXX in 2016. Similarly, the number of core millionaires in the country is expected to record a

forecast-period CAGR of XX.XX%, while the number of Chinese UHNWIs is expected to reach XX,XXX by 2016.






Volume of HNWIs

In terms of the share of total HNWI volume held by the various wealth bands; core millionaires accounted for the vast

majority in 2011, while UHNWIs accounted for only a very small proportion. During the review period, the share of total

HNWI volumes held by core millionaires declined while the share of Chinese HNWIs increased by X.XX percentage

points. This change was primarily due to the fact that the share of lower tier millionaires declined by X.XX percentage

points during the review period.

Table 6: Chinese HNWIs Volume by Wealth Bands, 2007–2011

Wealth Bands 2007 2008 2009 2010 2011 CAGR

2007–2011

UNHWIs X,XXX.X X,XXX.X X,XXX.X X,XXX.X X,XXX.X XX.XX

%

Core HNWIs XXX,XXX.X XXX,XXX.X XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X X.XX%

Total Volume of

HNWIs XXX,XXX.X XXX,XXX.X XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X X.XX%

Source: WealthInsight and BRICdata analysis © BRICdata



0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2007 2008 2009 2010 2011

Volume of High-Net-Worth Individuals






The total volume of Chinese HNWIs is expected to increase from X,XXX,XXX in 2012 to X,XXX,XXX in 2016, recording a

projected CAGR of XX.XX% over the forecast period. This growth in overall HNWI volumes is expected to be supported by

favorable economic government initiatives, the country’s positive investment environment, and a strong national economic

outlook.


Wealth Bands 2012 2013 2014 2015 2016 CAGR 2012–

2016

UNHWIs X,XXX.X XX,XXX.X XX,XXX.X XX,XXX.X XX,XXX.X XX.XX%

Core HNWIs X,XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X XX.XX%

Total Volume of

HNWIs X,XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X X,XXX,XXX.X XX.XX%




0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

2012 2013 2014 2015 2016

Volume of High-Net-Worth Individuals






Demographic breakdown of Chinese HNWIs by region

While the areas shown in the below figure account for XX% of China’s HNWI wealth, the fact that the remaining XX%

comes from the rest of the country demonstrates the fact that there are significant wealth holdings in China’s second and

third tier cities and that these cities are taking on an increasingly important role in the country’s continued economic

development. Despite this however, China’s most important economic regions remain the more developed Tier I cities of

the Pearl River Delta, Yangtze River Delta (YRD) and Bohai Economic Rim.

As China has three major economic hubs that act as centers of wealth creation, the fact that that Beijing continues to

account for the largest number of HNWIs in the country is interesting as it demonstrates the vital role the Chinese

government still plays in the country’s economic development; a point further reinforced by the fact that many government

officials are themselves HNWIs. However, it should also be noted that the YRD – which consists of Shanghai, Zhejiang

and Jiangsu – is home to XX% of China’s HNWI population, suggesting that the region’s famed entrepreneurialism and

business knowledge remain the most important factors in wealth creation.

Figure 9: Chinese HNWIs Regional Distribution (% Share), 2011


Figure 10: Chinese HNWIs Regional Distribution – Key Regions, 2011


Beijing

Guangdong

Rest of China

Beijing

Guangdong

Shanghai

Zhejiang

JiangsuTianjin

0%

2%

4%

6%

8%

10%

12%

14%

16%

7% 8% 9% 10% 11% 12% 13% 14%

GD

P G

row

th %

% Growth Number of HNWI

Bubble size: No. of HNWI






3.1.2 Ultra-high-net-worth-individuals (UHNWIs)

China’s UHNWI population comprises the top of the Chinese wealth distribution pyramid, accounting for X.X% of China’s

total wealth and nearly a quarter of all Chinese HNWI wealth. In China, UHNWIs have a unique status in the eyes of the

general public, as over a fifth of this group are super-elite ―Renminbi billionaires,‖ all of whom have at least US$XXX

million in investable assets.

Volume of UHNWIs

In 2011, UHNWIs accounted for only X.XX% of China’s total HNWI population. As a proportion of total UHNWI volume,

affluent millionaires accounted for the highest share of XX% in 2011, while centimillionaires accounted for a XX% share

and billionaires accounted for the remaining X% share. From 2010 to 2011, the number of centimillionaires in China grew

by XX%, compared to a XX% growth in the number of affluent millionaires and a XX% growth in the number of billionaires.

Despite relatively modest national economic performance and a decline in the Chinese stock market during the first half of

2011, the international and asset class diversification of the country’s UHNWIs allowed the band to continue to record

robust growth throughout 2011.

The global financial crisis in 2008 negatively impacted the overall number of Chinese UHNWIs and, while the numbers of

affluent millionaires and centimillionaires recovered strongly after the crisis, the number of Chinese billionaires increased

at a much slower rate during the remainder of the review period.

Table 12: Chinese UHNWIs Volume by Type of UHNWI, 2007–2011

Type of HNWI 2007 2008 2009 2010 2011 CAGR

2007–2011

Billionaires XX.X XX.X XX.X XXX.X XXX.X XX.XX%

Centimillionaires X,XXX.X X,XXX.X X,XXX.X X,XXX.X X,XXX.X XX.XX%

Affluent millionaires X,XXX.X X,XXX.X X,XXX.X X,XXX.X X,XXX.X XX.XX%

Total Volume of UHNWIs X,XXX.X X,XXX.X X,XXX.X X,XXX.X X,XXX.X XX.XX%


Figure 11: Chinese UHNWIs Volume by Type of UHNWI, 2007–2011


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2007 2008 2009 2010 2011

Affluent Millionaires Centimillionaires Billionaires






Over the forecast period, all categories of UHNWIs are expected to record strong growth, with the growth in the number of

Chinese billionaires expected to outpace the growth in the number of the country’s affluent millionaires and

centimillionaires. Overall, the Chinese UHNWI population is expected to increase by a total of XX.X% from 2012 to 2016,

from X,XXX.X in 2011 to a projected total of XX,XXX.X in 2016, and record a CAGR of XX.XX% over the forecast period.

This robust growth is anticipated to be led by an anticipated XX.X% increase in the number of Chinese billionaires and a

XX.X% projected increase in the number of centimillionaires in the country over the forecast period.

Table 13: Chinese UHNWIs Volume by Type of UHNWI, 2012–2016

Type of HNWI 2012 2013 2014 2015 2016 CAGR 2012–

2016

Billionaires XXX.X XXX.X XXX.X XXX.X XXX.X XX.XX%

Centimillionaires X,XXX.X X,XXX.X X,XXX.X X,XXX.X X,XXX.X XX.XX%

Affluent millionaires X,XXX.X X,XXX.X X,XXX.X X,XXX.X XX,XXX.X XX.XX%

Total Volume of UHNWIs X,XXX.X XX,XXX.X XX,XXX.X XX,XXX.X XX,XXX.X XX.XX%


Figure 12: Chinese UHNWIs Volume by Type of UHNWI, 2012–2016


0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2012 2013 2014 2015 2016

Affluent Millionaires Centimillionaires Billionaires






Demographic breakdown of Chinese Ultra HNWIs by region

The majority of China’s UHNWIs — almost XX% — live in the three major Tier I areas of the YRD (Yangtze River Delta),

BER (Bohai Economic Rim) and PRD (Pearl River Delta). However, while, like most of the country’s HNWIs, the majority

of China’s UHNWIs live in Tier I regions, there are also sizeable UHNWI populations in rapidly growing economic regions

in other parts of China. Within the wealth bands, it is interesting to note that billionaires have a very high concentration in

Guangdong, with the region accounting for roughly a quarter of Chinese billionaires.

Figure 15: Chinese UHNWIs Regional Distribution (% Share), 2011


Yangtze River Delta (YRD)

Bohai Economic Rim (BER)

Rest of China






3.1.3 The core high-net-worth individuals (core HNWIs)

As their name implies, core millionaires, a group that includes mid-tier and lower-tier millionaires, form not only the base of

China’s wealth pyramid, but also account for over XX% of the country’s total HNWI volumes and approximately XX% of its

HNWI wealth. The group also shares some notable demographic characteristics, being generally younger and more likely

to have earned their wealth than China’s overall HNWI population. Furthermore, core millionaires traditionally hold large

portions of their wealth in cash and other low risk products and build their savings to acquire real estate, in which they hold

a high proportion of their wealth. Notably, many Chinese core millionaires would also like to grow their wealth through

investments and would benefit from professional advice, making this group a vital market for wealth management

companies operating in China. Moreover, as core millionaires form the base of China’s wealth pyramid, an understanding

of their unique dynamics is essential for wealth management success in the country.

Volume of core HNWIs

During the review period, the number of Chinese core millionaires increased at a CAGR of X.XX%, rising from XXX,XXX in

2007 to X,XXX,XXX in 2011. Interestingly, while the number of mid-tier millionaires in the country grew at a faster rate

than the number of lower-tier millionaires, neither grew as fast as the volume of UHNWIs.

Table 16: Chinese Core HNWIs Volume by Type of Core HNWI, 2007–2011

Type of HNWI 2007 2008 2009 2010 2011 CAGR 2007–

2011

Mid-tier millionaires XX,XXX.X XX,XXX.X XX,XXX.X XX,XXX.X

XXX,XXX.X XX.XX%

Lower-tier millionaires

XXX,XXX.X

XXX,XXX.X

XXX,XXX.X

X,XXX,XXX.X

X,XXX,XXX.X X.XX%

Total Volume of Core HNWI

XXX,XXX.X

XXX,XXX.X

XXX,XXX.X

X,XXX,XXX.X

X,XXX,XXX.X X.XX%


Figure 16: Chinese Core HNWIs Volume by Type of Core HNWI, 2007–2011


0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2007 2008 2009 2010 2011

Lower Tier Millionaires Mid Tier Millionaires






Due to China’s favorable economic outlook, the number of Chinese core millionaires is expected to grow significantly over

the forecast period, with the volume of the group expected to record a CAGR of XX.XX% from 2012 to 2016. Overall, the

number of Chinese core millionaires is expected to reach more than X,XXX,XXX by 2016.

Table 17: Chinese Core HNWIs Volume by Type of Core HNWI, 2012–2016

Type of HNWI 2012 2013 2014 2015 2016 CAGR 2012–

2016

Mid-tier millionaires

XXX,XXX.X

XXX,XXX.X

XXX,XXX.X

XXX,XXX.X

XXX,XXX.X XX.XX%

Lower-tier millionaires

X,XXX,XXX.X

X,XXX,XXX.X

X,XXX,XXX.X

X,XXX,XXX.X

X,XXX,XXX.X XX.XX%

Total Volume of Core HNWI

X,XXX,XXX.X

X,XXX,XXX.X

X,XXX,XXX.X

X,XXX,XXX.X

X,XXX,XXX.X XX.XX%


Figure 17: Chinese Core HNWIs Volume by Type of Core HNWI, 2012–2016


0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2012 2013 2014 2015 2016

Lower Tier Millionaires Mid Tier Millionaires






3.2 HNWI Investments by Asset Class

BRICdata defines wealth as the net value of assets, including both financial holdings and tangible items. As such, and in

the interests of providing the most comprehensive possible analysis of China’s HNWI wealth, BRICdata has attempted to

calibrate the total wealth held by China’s HNWI across five major asset classes — alternatives, real estate, cash and

deposits, fixed income, equity and business interests. Additionally, liquid and investable assets were analyzed, so as to

provide further insight into China’s HNWI population and the opportunities it presents for wealth managers and private

bankers operating in the country. Liquid assets are made up of cash and deposits, fixed income and equities, while

investable assets include all assets except for business interests.

Figure 20: Asset Class Composition (% Share), 2007–2016


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Total Alternatives Total Real Estate Total Cash/Deposits

Total Fixed Income Total Equities Business Interests

APPENDIX




4 Appendix

4.1 About BRICdata

BRICdata publishes in-depth strategic intelligence reports that help its customers better understand opportunities in

emerging markets and industry sectors. Its reports provide an independent, expert view supported by primary research

and access to leading data and intelligence sources.

BRICdata is a comprehensive source of insights and analysis, and publishes a broad range of reports across a number of

different industry sectors, including consumer, retail, financial services, technology, telecoms and construction.

BRICdata is headquartered in London with research, analysis and account management teams based across Europe, the

US and Asia-Pacific. Its global research footprint is supported by a network of external associates, data partners and

industry experts to give the clearest possible perspective on emerging markets.

4.1.1 Definitions

For the purposes of this report, the following timeframes apply:

Review period: 2007–2011

Forecast period: 2012–2016

Table 28: Definitions

HNWIs The high-net-worth-individuals (HNWIs) wealth band comprises all types of HNWIs. It represents individuals that hold assets of US$1 million or more in equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests.

UHNWIs

The ultra-high-net-worth-individuals (UHNWIs) wealth band comprises the billionaire, centimillionaire and affluent millionaire types of HNWIs. It represents individuals that hold assets of US$30 million or more in equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests.

Core HNWIs

The core millionaires HNWI wealth band comprises the mid-tier millionaire and lower-tier millionaire types of HNWIs. It represents individuals that hold assets of US$1–30 million in equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests.

Billionaires Billionaires are HNWIs that hold investable assets of US$1 billion or more in equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests.

Centimillionaires Centimillionaires are HNWIs that hold assets between US$100 million and US$1 billion in equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests.

Affluent Millionaires Affluent millionaires are HNWIs that hold assets of US$30–100 million in equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests.

Mid-Tier Millionaires Mid-tier millionaires are HNWIs that hold assets of US$5–30 million in equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests.

Lower-Tier Millionaires Lower-tier millionaires are HNWIs that hold assets of US$1–5 million in equities, bonds, cash and deposits, fixed-income products, real estate, alternative assets and business interests.

Source: BRICdata analysis © BRICdata

APPENDIX




4.1.2 Areas of expertise

BRICdata operates a dedicated, multilingual team of in-house industry analysts with significant experience of global and

country-level research. BRICdata also maintains data and research partnerships with other research companies, industry

experts and trade associations, along with a network of independent industry consultants and former industry participants

contributing research and reports to bring additional insight and expertise in more specialist areas.

BRICdata’s research offering spans the following industry areas:

Construction

BRICdata publishes reports covering the entire construction value chain: construction materials, equipment, construction

services, architectural services and interior design. It also covers the main value sectors of construction activity:

commercial, infrastructure, industrial, institutional and residential.

This comprehensive view of the market enables BRICdata to detail key growth sectors and countries and identify the most

attractive industry opportunities.

Consumer goods

Covering a broad range of areas across the consumer goods market, from interior products to fast-moving consumer

goods (FMCG), ingredients, and packaging, BRICdata offers a comprehensive insight into key consumer sectors across

fast-growing markets, identifying key trends, future innovations and growth opportunities.

Comprehensive data sets including unique primary survey-driven research creates accurate market forecasts and

understanding of the factors driving consumption behavior.

Financial services Providing detailed insights into insurance and banking markets, BRICdata’s financial services reports identify key market

opportunities, emerging technologies and channel strategies. The reports provide unique data combined with local

examples of best practice and expert insights into the market.

Retail BRICdata maintains a comprehensive database of forecasts of retail spending, along with a series of unique indicators

enabling a forward view of retailers’ prospects in emerging markets. The reports identify emerging concepts in retail,

including the nascent online and mobile retail sectors in the BRIC countries and other emerging markets.

Technology

BRICdata tracks key trends and innovations, emerging technologies and markets, and the key operators in both emerging

markets and technologies. Covering a range of emerging and disruptive technologies including telecoms, social media,

online and mobile retailing, and telemedicine, BRICdata examines strategies for success, the state of the competitive

landscape and the inherent threats and opportunities in the emerging technological economy.

4.2 Methodology

All BRICdata reports are rigorously sourced and created according to a comprehensive, two-stage methodology. This

includes internal audit and primary research.

A) Internal audit

Review of in-house databases to gather existing data:

o Historic market databases and reports

o Company database

o projects database

B) Primary research

Review of the latest company strategy and asset management trends

APPENDIX




1) Research

A. Sources

Collection of the latest market-specific data from a wide variety of industry sources:

o Government statistics

o Industry associations

o Company filings

o Broker reports

o International organizations

B. Expert opinion

Collation of opinion taken from leading industry experts

Analysis of third-party opinion and forecasts:

o Broker reports

o Industry associations

o Official government sources

C. Data consolidation and verification

Consolidation of data and opinion to create historical datasets

Creation of models to benchmark data across sectors and geographies

2) Research Analysis

Market forecasts

Feed of forecast data into market models:

o Macroeconomic indicators

o Industry-specific drivers

Analysis of Market Databases to identify trends by sector:

o Latest trends

o Key drivers of the market

3) Report Writing

Analysis of market data

Discussion of company and industry trends and issues

Integration of survey results

Annual review of trends

Standardization of market definitions using recognized industry classifications

4) Quality Control

A. Templates

Detailed process manuals

Standardized report templates and accompanying style guides

Complex forecasting tool used to ensure forecast methodologies are consistently applied

QC checklists

B. QC process

Peer review

Senior-level QC

Random spot checks on data integrity

Benchmark checks across databases

Market data cross-checked for consistency with accumulated data from company filings

APPENDIX




4.3 Disclaimer

All rights reserved.

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means,

electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, BRICdata.

The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the

findings, conclusions and recommendations that BRICdata delivers will be based on information gathered in good faith

from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. BRICdata can,

therefore, accept no liability whatsoever for actions taken based on any information that may subsequently prove to be

incorrect.

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