More wealthy families
Updated: 2007-10-31 15:19
China has the world's fifth largest number of households with more than US$1 million in liquid assets, trailing only the United States, Japan, Britain and Germany, said a report released by the Boston Consulting Group (BCG) yesterday.
The number of such Chinese households has come at 310,000 by the end of 2006, up from 124,000 in 2001, more than 48,000 of which have more than US$5 million in liquid assets.
Given China's continuous and rapid economic growth, the report also predicted the number to double by 2011, reaching 609,000.
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Meanwhile, the number of wealthy families, those with financial assets worth 100,000 to one million dollars and which is equivalent to China's middle class, is also expanding, according to the report.
BCG forecast the number of wealthy families in China would rise to 6.4 million by 2011 from the current 3.25 million.
"It is good news that China's wealth, though highly-concentrated, is being distributed among a wider band," said Tjun Tang, partner of BCG, at a press conference in Beijing. He added that households with more than 100 million dollars are very rare in China but in India are more common and own a larger percentage of the country's wealth.
Largely because of a robust investment rise, high savings rates and the dynamic GDP growth, China has become the second largest private banking market after Japan, with US$2.5 trillion in total household financial assets, excluding real estate assets and assets from industries.
"Asia has a much higher profitability in private banking than any other market," said Tang, adding this service is only at a primary stage in China's mainland.
The Bank of China opened its first private banking department in Beijing and Shanghai in March this year, to provide individual services for clients with liquid financial assets above US$1 million.
China Construction Bank, another major commercial bank, has also started premium banking services targeting clients with more than three million yuan in assets in Shanghai, Beijing and Hangzhou.
Overseas banks like Citibank, Standard Chartered, Hong Kong and Shanghai Banking Corporation (HSBC) have opened offices for private banking business in China to ensure their share of the most lucrative banking service, which makes on average ten times the profits of the retailing business in the European and American markets.
Tang suggested domestic private banking institutions should provide tailored services based on the characteristics of the Chinese clients.
"Most of the wealthy people in China are entrepreneurs, or first-generation entrepreneurs who started from scratch, which has very profound implications on their behavior and how they manage their money," said Tang.
"They like to remain very liquid in their cash holding," said Tang, adding that China's cash holdings have declined over the past few years due to bullish stock markets, yet they remain as high as 60 percent, compared with 20-30 percent in the US and Europe.
Tang said these entrepreneurs, mostly involved in high-growth industries like property, manufacturing, retail sales and IT, are also highly speculative and tend to invest in industries like property and financial exchange markets. "They have very little patience and expect a 10-20 percent return in a week."
The report from BCG, one of the world's leading international strategy and general management consulting firms, after surveying 62 countries that make up 96 percent of the world's total GDP, showed that 9.6 million high-net-worth households worldwide, or 0.7 percent of the world's total households, have US$33.2 trillion in liquid assets which constitutes about one third of the world's total financial assets.
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