Chinese language - Finance: Household wealth boom calls for private banking

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BIZCHINA / Biz Media Digest

Finance: Household wealth boom calls for private banking

(Xinhua)
Updated: 2007-07-26 16:41

Both domestic and foreign banks are grappling for a bigger share of the
fledgling private banking business in China, as the accumulating wealth
of Chinese households seems to promise alluring profits for the novice
financial service.

The aggregate household wealth in China almost doubled in five years to
hit US$1.44 trillion in 2004, up from US$890 billion in 1999, according
to a Boston Consulting Group (BCG) survey.

Meanwhile, the liquid assets of Chinese wealthy families are estimated to
reach US$1.6 trillion by 2009, doubling the number for 2004.

The rapidly-growing household wealth in China forms sharp contrast
against the slow development of the wealth management services.

Many Chinese simply hold the notes in their hands, shunning investment.
The BCG survey found that the wealthy Chinese kept 71 percent of their
property in cash, while the world average is only 34.6 percent.

"The private banking business in China is still at primary stage. Almost
every bank is taking its first step in 2007." said Mao Feng, the managing
director of the private clients and asset management department of
Deutsche Bank.

Bank of China recently opened its first private banking department in
Beijing and Shanghai in March this year, to provide individual services
for clients with liquid financial assets above one million US dollars.

It had pledged to provide services of international standards by joining
hands with the Royal Bank of Scotland (RBS).

More domestic banks are hurrying to step up their private banking
services for top-class clients.

Citibank, Standard Chartered, Hong Kong and Shanghai Banking Corporation
(HSBC) have opened offices for private banking business in China to
ensure their share for the most lucrative banking service, which makes on
average ten times the profits of the retailing business in the European
and American markets.

The private banking market in China is growing at an annual rate of 12
percent, says a report from the Bank of China.

Private enterprise owners and management personnel of middle and high
levels would each account for 35 percent of the target clients for the
private banking service, and others may include professionals such as
lawyers, senior economists, IT engineers, said Lian Ping, the chief
economist with the Bank of Communications.

Lian said the domestic banks should improve client segmentation to
provide more client-oriented services in order to compete with the more
experienced foreign banks.

Talents with professional training is badly needed to provide advice and
service specifically tailored to clients, Lian added.

Domestic banks need the support of strong investment banks when it
develop its private banking business in China, said Zhou Wei, manager of
the wealth management department of the Industrial and Commercial Bank of
China.

"It would take a long time for foreign banks to provide good private
banking service for Chinese customers, as we could not succeed without
the strong support from investment banks and a powerful consulting
group," said Claude Haberer, CEO of BNP Paribas Private Bank in North
Asia.

Experts also urged related departments to establish a risk supervision
system to help ward off various risks involved in the private banking
business, and called for the setting up of a multi-level financial market
with a comprehensive and balanced portfolio for better development of the
service in China.

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