The phenomenal uprising of China's wealthy class is the soil to cultivate private banking. The Report from Data Monitor Company in 2003 shows that there are more than 2.98 million households with a total financial assets of over USD$100,000 in China. A World Wealth Report 2005 issued by Merrill Lynch and Cap Gemini also indicated there are 299,500 affluent people with current assets (including cash, securities, and non-owner occupied houses) of over USD$1 million in China. It is quite difficult and challenging to collect this data in China therefore experts estimate the actual figure of affluent people whose assets is over USD 1 million is much higher.
The Chinese Government announced that the RMB conversion business will be opened to all foreign banks in China by the end of this year, keeping its promise after gaining entry in the World Trade Organization (WTO).This creates an unprecedented opportunity for foreign banks and financial institutions to conduct RMB business for Chinese citizens and especially to get involved in lucrative "private banking" in China. It will however create unpredicted challenges as well.
As a result of a booming Chinese economy, the demand for private banking and proper wealth management in China is growing rapidly. However, there are very limited services available to consumers in the current financial marketplace and now it is the right time for foreign banks to enter this market. At present, China offshore private banking approximately accounts for one fifth of the entire potential market.
Full -scaled entry of foreign banks into China is expected to happen very soon, but one of the initial challenges they might face will be the difficulties in rapidly forming branches in China. However, their advantage is quite obvious, which is the ability to secure high-end personal wealth management business over local banks by utilizing their mature, private banking products and services.
Private banking business requires a wide range of structured products to offer to its clients with high expectations. The major entry barrier for foreign banks entering into the Chinese financial market is the capital control of the Chinese Government. Chinese citizens are not permitted to send over USD 20,000 per year and any exceeded amount requires special consent. A large foreign currency remittance from China to overseas is usually very complicated and time consuming. In April this year, the China Banking Regulatory Commission announced a new regulation to allow Chinese local banks to enter into the wealth management market and help Chinese citizens to invest in overseas. There is no clear signal that China will fully open its doors to foreign Banks but it shows the Chinese Banking Regulatory Commission will encourage foreign banks to cooperate with Chinese financial institutions if they want to enter into the Private Banking sector in China.
There are key benefits for entry into the personal wealth management business of Private banking in China. Local Chinese Domestic banks offer a well-established network of branches, have rich customer resources, and operate a mature RMB business, but more importantly possess a comprehensive understanding of domestic financial policies and China's market environment, on which foreign banks fall short completely. In addition, local banks are absolutely dominant in terms of creditability and social recognition. Foreign banks are more competitive in terms of capital, management, product offerings, education, as well as technology and business innovation.
In conclusion, with the emergence of enormous opportunity and challenge simultaneously for all financial organizations either locally here in China or overseas, "A Gateway to the World - Private Banking Forum" will concentrate to provide discussion opportunities to the following issues:
- Current Private Banking and Wealth Management policies and regulations in China
- How to develop structured financial products and services to suit Chinese national conditions guided by correct financial policies
- Getting to know each other (Chinese domestic banks and foreign banks) and how to offset weaknesses in terms of Private Banking
- The Characteristics of Chinese wealthy clients
- How to package and promote the idea of "Private Banking" to a emerging China market
- Meeting with Chinese potential affluent clients face to face
Terminology
Mass Banking
Provide low-end personal financing services for the customers with personal financial assets below USD$ 100,000.
Affluent Banking
Provide medium-end personal financing services for the customer with personal financial assets between USD$100,000 to USD$ 1 million.
Private Banking
Provide personal property investment and management services for the customer with personal financial assets of at least USD$1 million. The most distinguishing feature of private banking is to provide customized financial service, covering broad fields such as assets management, investment, trust, taxation and legacy arrangement, collection and auction. These services are provided by specially trained wealth management consultants who give one-to-one service, and individualized product portfolios.
Family Office
High-end service in private banking offered to individual or household customers with financial assets of at least USD$150 million. Family office features high exclusivity, composed of a top-level wealth management team that provides comprehensive family assets management service for one or several wealthy families, often accompanied with inheritance phenomenon lasting for several generations.
