How to enter to the USD 16 Trillion Chinese Weath management market ?
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Situation about Wealth Management in China
Investment & Pensions Europe recently released the Top 500 Asset Managers report 2021. The report revealed that China’s top 30 asset managers manage assets totalling 5.41 trillion euros ($6.56 trillion). This represents 35 percent of China’s entire asset management industry.
Real Estate in China : the reflex
China’s household wealth is expected to grow faster than its GDP, at a time that wealthy and mass-affluent individuals are in desperate need of comprehensive financial advice.
It is no secret that China’s economic growth is driven by its household wealth. The country’s GDP forecast for the next decade will average 4.5% per year. Many investors don’t realize how rapidly household income is increasing and what this means for China’s wealth management and wealth advisory industries.
Consider the following: China’s per capita income was $195 in 1980, $959 2000, and $10,500 2020. This is to show the extent of China’s rise in the last 40 years. It is now expected to rise to $20,000 by 2030, which is well above the $12,690 threshold set by the World Bank for “high-income” countries.
“In fact, China’s wealth to GDP ratio has already reached an inflection point, as household wealth is compounding faster than GDP,” Richard Xu from Morgan Stanley, Chief China Financial Analyst.
Morgan Stanley analysts from different disciplines and regions looked at the investment opportunity from many angles in a recently published Blue Paper. Investors may find parallels with other economies but the sheer size and evolution speed of China’s asset management industry place it in a unique category.
China’s rise in household wealth could result in more than $16 trillion (100 billion renminbi), inflows into the wealth management market. This is just as high-net-worth households and wealthy households seek more detailed financial advice. This could increase household financial assets to RMB424 trillion. Wealth managers could address close to RMB170 billion, potentially tripling industry revenues by 2030. This represents a historic opportunity for China’s financial services sector and global players. Morgan Stanley estimates that portfolio inflows could reach as high as $2 trillion.
China’s Real Estate Wealth has Largely Increased Over the Past 20-30 Years, Leading To More Comprehensive Financial Needs source
Multiple sources confirmed that global investment banks won’t be less interested in lucrative work with Chinese companies overseas listing, despite increased scrutiny and paperwork under the new regulations.
Last week, the China Securities Regulatory Commission (CSRC), proposed rules regarding overseas listings. These include a requirement for banks that manage a Chinese company’s offshore listing to register with regulators
By January 31, foreign banks will have to file an annual report detailing the offshore listing of Chinese companies they worked on in the previous year.
The registration process is complex and what information is required to be included in reports is unclear. However, the source, which included investment bankers and lawyers who specialize in overseas listings, stated that the requirement was unique and unprecedented.
Investment Firm in China
Western banks will need to weigh their desire to make millions by listing Chinese companies on offshore bourses against the costs of tighter oversight.
New Chinese Millionaires Need Financial Advice
A remarkable share of China’s wealth was accumulated in a short time period, and, up until recently, in complete absence of any local wealthy advisory industry.
Many Chinese high-net-worth individuals are first-generation entrepreneurs and need extensive advice about everything, from estate planning to asset management. Xu says that the market in the middle- and high-end will continue to be a sweet spot for wealth managers such as top shareholding banks who are capable of sourcing high-quality assets and providing high-touch services.
Investors should not overlook asset allocation services for middle-income or mass-affluent Chinese households. In China, income distribution is more even than in other countries. Xu says that the best platforms for this shift are large online wealth management platforms and leading retail banks.
- By 2030, Advisory fees could triple
The backdrop of increasing wealth and increased demand for financial advice means that the business model is shifting away from a primarily product distribution model to one that charges an advisory-fee fee.
“We believe that wealth allocation and financial advice are the most promising areas,” says Xu. His team predicts that fees will represent 24% of assets-management revenues by 2030. This is a significant increase from the current 1%. The issuance of financial advisor licenses could change the fees streams in wealth management and lead to a potential tripling in revenue opportunities by 2030.
It is important to note that new money not only won’t be pouring into stocks due to the expansion of China’s wealth-management industry. He says that a small shift in household financial assets will occur from investments to deposits. This is due to China’s unique capital-demand structure. It will give leading retail banks an advantage.
Global Weath Management Leaders have the Most to Win
The pivotal moment in China’s wealth-management industry coincides with wider trends in wealth and asset administration. Industry leaders will see higher-fee income growth due to continued global consolidation.
Chinese investors will also look to diversify their investments, triggering an estimated $2 trillion of outflows from China to the other markets in the next 10 years. This is less than the Apple market cap.
. “We believe one of the greatest opportunities for global companies will be from the spillover Chinese household financial assets into offshore stock markets,” Betsy Graseck is the Global Head of Banks & Diversified Finance at Morgan Stanley Research
. “Firms with the most access to equity products and comprehensive global products will have a greater chance of capturing China’s wealth,” says Betsy Graseck, Global Head of Banks and Diversified Finance at Morgan Stanley Research.
- Recent Concerns May Be a Buy Opportunity
Given the lingering geopolitical tensions, international investors are understandably skeptical of China’s market. This year’s regulatory reset around certain sectors–such as technology, education and, most recently, cryptocurrency–could give additional pause.
Yet, detours and speed bumps in China’s economic growth have always been part the roadmap. Investors who have a long-term view may be interested in their strategic approach. Chief China Financial Analyst Xu says,
“Time and time again, concerns over China’s growth have led to compelling investments opportunities.” “We believe that wealth and asset management are one of these opportunities.”
How do you establish your presence in China?
It seems difficult, right? Complex ….
Follow this guideline
It is crucial to keep in mind one principle when investing in China: An investor must find you on his own. It is not a good idea to search for all 344 billionaires online and then contact them personally. You shouldn’t try to impress them by imposing yourself on them. It is your responsibility to be smart and to make it appear as if they have made the decision to take you into consideration and then to choose you.
Simple. Chinese investors are willing to invest. They will look online for investment opportunities. They should have some information. This is a preliminary preparation before you contact them.
Your website will not be useful here. It is necessary to either migrate the website to China or create a new one.
- Sometimes, foreign websites are blocked or don’t appear in search results. Make sure to choose the one with Chinese hosting.
- Websites written in English are ineffective for people who don’t know English. Make the website in Mandarin.
- Websites that don’t allow for communication directly and immediately will not be preferred – choose the one with Click-to-Chat.
- Websites without enough details aren’t attractive. Make sure it is relevant and informative.
- Websites that contain censored information are prohibited. Be careful when delivering your content.
A WeChat account could also be an important part of your preparation.
- WeChat is used daily by approximately 900 million people.
- WeChat offers amazing opportunities to engage and inform;
- WeChat allows you to share your information in an attractive and simple, but still detailed manner (enquire for an e-brochure).
- WeChat is the best platform to communicate directly.
How can you let investors find your company?
It is possible to ask them if they search for your website on Google. They go to Baidu, which is similar to Google but is a search engine for Chinese users only. They must search for the project they want to invest in and then find you there.
Visibility does not just mean having a Chinese website that can be found theoretically. Chinese investors are not content to look through hundreds of search results. They will choose the first few.
Search engine optimization can help you get to the top of Baidu, and allow investors to stumble across your site by chance.
How do you get to the top of Baidu?
Create a Baike page (Chinese Wikipedia), and tell a wonderful story about your project there.
Penetrate Baidu Zhidao, Zhihu (Chinese Quora) – So that investors know exactly who and what you are.
Tieba has more backlinks.
You will be able to enjoy more trust from Chinese investors by achieving a top Baidu rank – this is a significant achievement.
You may ask me if Baidu has ads like Google, since SEO seems to be a tedious task.
You can pay Baidu to run a campaign to generate leads using pay-per-click (or PPC). But, none of the 344 billionaires I know would be interested in projects hidden behind such ads. They want something more reliable, trusted, reputed and long-lasting.
What happens when they discover your WeChat or Website account? They cannot see anything you have to say about yourself. They will need to verify that you are who you claim to be.
In China reputation is everything (when matter to Investment)
The point is that you should have as many people talking about your project as possible. Positive comments and only positive thoughts are allowed. Only the most positive remarks, only the best thoughts, about your highly progressive project, and only the prospects for an investment, will be accepted.
How do you get a great reputation?
You should be focusing more on forums
As we have said before, backlinks can be derived from forums and contribute towards a higher rank on Baidu. Forums influence the AI that analyses you and places you among your competition, fishing for Chinese investors.
Forums can also be a source for information for investors who are searching.
It is a huge advantage to be mentioned in discussions about related fields. Investors will notice that you are worth the effort if there is a flood of positive comments.
Chinese forums include Zhihu, Tianya.cn, Baidu Tieba, Douban. Zhihu is worth special mention. It is used daily by more than 160 millions Chinese, and serves as the largest knowledge-sharing and Q&A platform.
Delve deep into PR
PR is a great way to tell stories and impress your target millionaire. Investors are experts. They are intelligent and capable of making wise decisions. If they were to seek out recommendations, they would only trust professionals.
They can find professional advice in articles and insights from experts in serious information sources.
Although PR can be a complex area of influence, it could bring outstanding results.
Social Media: The best way to connect with Chinese People
You can use forums and PR to feel like you are being talked about and commented on by others. However, social media allows you to speak for yourself.
WeChat has over 900 million members. WeChat allows you to share content via WeChat groups or one’s official account.
WeChat group members tend to meet according to their interests or fields of expertise.
Share the information
Talk about your problems on a large scale
Find new ideas
Make recommendations, etc.
Douyin, a relatively new platform, has more than 500 millions users. It allows you to upload video content of short duration in order to fill the gaps in the busy lives of Chinese.
Anyone looking for investors will find Douyin a powerful tool. It allows one to connect with KOL, and also promotes oneself as an entrepreneur. KOL can be a powerful tool to help investors create an attractive image.
Douyin can be used to publish your own content on private terms.
Is it possible?
For Chinese investors, real estate overseas is their most preferred foreign investment option. They are attracted to international relocation.
Before they can make a decision on an investment plan, property investors must go through the same stages as I mentioned.