the mushrooming Chinese wealth sector is showing no sign of slowing
down. Boston Consulting Group predicts the number of dollar
millionaire households in China will almost double from 310,000 at
the end of 2006 to 609,000 by 2011. Unsurprisingly, private banks
both domestic and foreign are ramping up their efforts to gain a
foothold in the region.
The big boys have long had operations in China in preparation for
an easing of regulatory pressure, and are now applying for
renminbi-denominated licences in order to better attract Chinese
clients.
Deutsche Bank (China) began operation on 2 January following
approval from the China Banking Regulatory Commission (CBRC) to
incorporate in Beijing and will now offer renminbi-denominated
products and services across its branches in Beijing, Shanghai and
Guangzhou. UBS and BNP Paribas are among the others awaiting
approval for renminbi licences, while HSBC, which launched its
locally incorporated HSBC Bank (China) last year, began to offer
private banking services in Beijing, Shanghai and Guangzhou this
April.
Société Générale is also looking to launch wealth management
products this year, subject to its Chinese operations being
approved for local incorporation in May. Schroders, meanwhile, has
taken advantage of new regulations allowing fund management firms
to offer wealth management services and has signed initial deals
through its Bank of Communications Schroder Fund Management joint
venture.
Despite such progress, the regulatory environment is still highly
challenging, with restrictions on product offerings and strict
currency controls. Indeed, the CBRC issued a note in April
criticising what it claimed were six deficiencies present in some
Chinese wealth management businesses, including inadequate risk
controls and staff who are “not competent at their work”.
Another challenge faced by the global players is from Chinese banks
themselves. The Industrial and Commercial Bank of China saw wealth
management profits rise by 65 percent in 2007 and plans to create a
dedicated private banking service this year, while the Bank of
Communications has announced its intentions to become a leading
wealth management player by 2011. The Bank of East Asia will add 20
mainland private banking outlets to its existing 53 offices in
2008, while Bank of China, CITIC Bank and China Construction Bank
are also home to nascent private banking services.
China Merchants Bank is even more bullish following the launch of
its wealth management offering in Beijing last year. The bank will
launch new offices in Shanghai, Hangzhou and Nanjing in 2008.
The fast pace of expansion is reflected in the take up of wealth
management products. The CBRC has said that RMB600 billion ($85.6
billion) worth of such products were sold in the first nine months
of 2007, and estimates the figure for the last quarter of the year
stood at some RMB400 billion.
