While onshore private banking in China remains alluring, the introduction of the ‘common prosperity’ policy has created more downside risk for the market, according to a recent research report by UBS.

China’s policy pivot towards ‘common prosperity’ – Beijing’s latest drive to tackle the wealth gap  – could hit the mainland’s private banking industry onshore, according to a recent equity research report by UBS. 

«Overall, we think China's [private banking] industry still has significant growth opportunities from further expansion of the market size and shifting household asset mix but uncertainties have increased amid the government's common prosperity initiatives,» the report said.

Wealth Growth and Flow

Amongst the concerns for the future outlook is the broader impact of ‘common prosperity’ initiatives on entrepreneurship and the growth of high net worth individual (HNWI) wealth. 

The report also highlights worries about the potential for policy uncertainties and the call for voluntary donations to «trigger Chinese HNWIs' desire for more geographic diversification», resulting in more offshore reallocation of domestic investable assets.

Policy Upside

Despite the challenges, the report notes that there is still some possible upside to ‘common prosperity’ initiatives.  

Policy support could drive SME growth and tightening property regulations could lead to asset reallocation to financial assets. 

Also, an emphasis on philanthropy and tax compliance could create rising demand for professional services related to tax consulting, family trusts, charitable trusts, and large ticket-size insurance.

Downgraded Forecast

While UBS remains positive on private banking opportunities in mainland China, with 214 trillion yuan ($33.76 trillion) in investable assets amongst HNWIs in 2030 as its most optimistic projection, it notes that the post-policy environment has created a «more polarized» range of possibilities. 

In 2025, the report forecasts that the private banking revenue pool in China will range between 140-500 billion yuan, down from the previous forecast of 178-480 billion yuan.