Wealth managers set a course for Chinese mainland
Opportunities are opening up in China, as both big institutions and private clients look to diversify assets abroad
Despite the still restricted nature of the Chinese financial system – with banks struggling like the sun to break through the Beijing smog – both domestic and foreign institutions are stepping up plans to attack the fast growing mainland wealth market.
European fund house Pioneer Investments, which recently held its annual Colloquia thought leadership event in Beijing, sees the potential $3.14tn (€2.4tn) Chinese asset management market as one of Asia’s key growth stories.
Chinese economists and commentators hotly debate whether their GDP growth will fall closer to 8 per cent or 7 per cent. This seems largely academic for the outside world, with zero growth in Europe, and with the US economy struggling to expand at 2 per cent annually. But there is a realisation among the Chinese investment community that diversified portfolios may be important in the longer term and that valuations in US and European equities are looking increasingly attractive.
As an economy begins to develop, assets need to be invested outside the home region. We have seen that trend occur in Hong Kong and are beginning to see that trend in China
“We are seeing a greater focus on international investing,” says Jack Lin, head of Pioneer’s Asian business. “As an economy begins to develop, assets need to be invested outside the home region. We have seen that trend occur in Hong Kong and are beginning to see that trend begin in China.”
He sees international investing in China currently growing faster than flows into domestic equity and fixed income. Sovereign wealth funds such as the $410bn China Investment Corporation, created in 2007, have made buying stakes in foreign companies their key priority. This has been a controversial practice, with US critics suggesting strategic stakes are secured to boost China’s political influence in foreign markets.
“We invest in infrastructure, minerals, energy, real estate and public markets. We do anything which the host country we invest in believes is a good idea,” says Jin Liqun chairman of the board of supervisors at the CIC. “We are very conscious of relationships, so we will not invest in casinos or tobacco or any sector around which the country is worried about national security.”
But while this type of international exposure can be more straightforward for big ticket institutions, private clients can struggle to fulfil their portfolio needs. “Private banking in China is only four years old, the product range is incredibly limited and the level of talent is junior at best,” says Mykolas Rambus, CEO of Singapore-based consultancy Wealth-X.
Leading the pack of Chinese institutions which have identified wealth management as their key growth market is China Merchants Bank, headquartered in the Southern city of Shenzen.
“Foreign institutions will come and will be our competitors,” says Ding Wei, head of the branch network and customer relations at CMB. “But we have home advantages. We know the Chinese culture, which they don’t understand and have to fit into. It’s not going to be easy for them.”
Mr Ding confirms that private clients are much keener on diversifying assets into Europe and the US – where they believe bargains can be had – than growth markets of South East Asia. “The crisis has brought opportunities.”
