The ebb and flow of China’s Wealth Market (Part II)


China’s private banking industry 中国私人银行业 Part II

As of 2008, it is estimated there were about 300,000 high net worth individuals in China with liquid of over USD $1.5 million and a total wealth of about $4.3 million.  In total, wealthy individuals assets reached about $1.5 trillion.  In 2009, their total wealth reached $1.4 trillion and lived mainly in 5 provinces:  Shanghai, Beijing, Guangzhou, Jiangsu (near Shanghai) and Zhejjiang. (also near Shanghai)  In 2010, despite the global slowdown, it is currently being estimated to reach over $1.8 trillion due to the ever advancing real estate market.  This growth comes despite a 50% equities market value drop and the almost complete halt of real estate transactions due to intense government intervention and new regulations.  So despite real estate transactions dropping over 90% in 2010, prices rose 13 percent.  Meanwhile cash and cash deposits gained 25% in 2010.  It is becoming ever more clear that China’s wealth market is an almost unstoppable force and continues to have enormous potential for the foreseeable future.

Naturally the number of wealthy Chinese has continued to increase.  As we said in the first part, in 2008, China had about 300,000 wealth individuals with 10,000 ultra wealthy and total wealth stood at $1.3 trillion.  Efficient Equity predicts those numbers will all rise in 2010 with wealthy individuals amounting to about 350,000 and total wealth at $1.8 Trillion.  All this despite a miserable export market, a lack of willingness among Chinese exporters to invest in new facilities and tanking share values worldwide.

New figures suggest that Chinese growth has dropped to 9% from October 2010 and near the governments 8% floor macroeconomic, stability benchmark.  It is expected that China will continue to grow at near the 9% figure despite serious challenges such as FDI decline, continued global weakness, export slump and general overall turbulence. However, most analysists are predicting China’s wealth market to continue setting new highs in 2010.

The fall in equity prices has taken much risk out of investing in China’s domestic stock markets.  In other words, the global slowdown is priced in to current valuations.  And the end of the governments stimulus measures has also not led to the slowdown that many expected.  So much in fact that the Chinese government has been raising interest rates to head off inflation.


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