After years of consolidation and improved financials, foreign players have the confidence, resources, and earnings pressures to participate in the China story – fully.
What does that mean?
The classic China offshore private bank operating out of Hong Kong and Singapore must be complemented by direct onshore engagement with the 1.8 million Chinese high net worth clients (of whom 116,000 are ultra-high clients).
«Foreign wealth managers have noticed the aggressive entry by Chinese banks»
On the other hand, China onshore with its huge sums of liquid assets will be a story that the capital market would love to hear. Even a small market share in China onshore could very significantly lift the valuation of an international private bank.
In addition, clients are getting more sophisticated?
Yes, as the first generation of entrepreneurs begin to retire and younger clients think about wealth in global terms, the intellectual edges of foreign wealth managers in succession planning, global asset allocation, holistic risk management, and corporate finance advisory become more relevant.
Do you think the foreign entrants will do better this time?
It’s become easier mainly in relation to control. After the recent liberalization by Chinese regulators, foreign investment banks can set up majority-owned joint ventures in China and more easily obtain brokerage and asset management licenses to serve high net worth clients. Foreign commercial banks also have gained a more level playing field in terms of accessible product categories.
«China’s world-beating technology has already re-written many rules»
Meanwhile, it’s become tougher because the China onshore wealth market has evolved into a complicated and fast-paced universe on its own, with frequent paradigm shifts.
Could you elaborate on that?
For example, onshore private equity firms and hedge funds are now a key asset class but fiendishly tricky to do due diligence on; onshore shadow banking products are evolving into sub-markets with nuanced risk/return profiles, but continue to be indispensable building blocks for portfolios; onshore equities trading has acquired a heavy offshore elements via Stock Connect and similar cross-border linkage schemes; and onshore macro trends are hard to interpret without shrewd understanding of China’s policy dynamics.
How to integrate these elements into a competitive and differentiated client proposition will be a key question that any foreign entrants must address.
How important are digital capabilities as regards China?
