China's private wealth stood at 165 trillion yuan (NZ$33t) in 2016, an increase of almost 50 per cent from two years earlier, according to new research from China Merchants Bank and Bain and Co.
The report forecasts the market will grow 14 per cent this year to 188t (NZ$38t) yuan. Not surprisingly, with such a prize on offer, this wealth is leading to fierce competition among financial services players, all hoping to service China's ever growing number of rich individuals.
Domestically, Chinese banks have a dominant position and are holding off the threat from wealth management financial technology firms and foreign players. But when it comes to Chinese wealth overseas, all is still to play for.
"Where there is demand, there is supply, and as there are a lot of opportunities in the private wealth market, the competitive arena has become more intense," said Wang Jing, manager at China Merchants Bank's private banking department. She was speaking in Hong Kong on Wednesday at the launch of the China Private Wealth Report 2017, produced by the bank and Bain and Co.
The size of the mainland's private wealth market climbed 47 per cent from 112t yuan (NZ$22t) in 2014. The total 165t yuan (NZ$33t) of investable assets last year represents a more than sixfold increase from just 26t yuan (NZ$5t) a decade earlier, according to the survey.
The report found that at the end of last year there were approximately 1.6 million Chinese with at least 10 million yuan (NZ$2m) in investable assets, eight times higher than a decade ago.
"As the number of China's wealthy continues to grow exponentially, it is clear from the research that they are incredibly diverse, have a multitude of needs and that their priorities are starting to shift," said Jennifer Zeng, a partner at Bain and one of the authors of the report.
The study found that 63 per cent of Chinese high net worth individuals (HNWIs) - those with investable assets of over 10 million yuan - had their assets managed by professional institutions, as compared to just 36 per cent in 2009, when a majority of China's wealthy managed their assets themselves or within the family.
The report found that HNWIs allocated more than 60 per cent of their wealth to China's joint-stock banks - mid cap lenders including China Merchants Bank itself - roughly 15 per cent to each of non-banking wealth management institutions and the big four state owned banks, with only the remainder left for foreign banks.
"Chinese high net worth individuals choose who to manage their wealth based on their professional expertise and brand name among other factors, and the joint-stock commercial banks initially focused more on private banking than did the big state-owned banks," said Zeng.
As the number of China's wealthy continues to grow exponentially, it is clear from the research that they are incredibly diverse, have a multitude of needs and that their priorities are starting to shift.
"As for the foreign banks, they can play a role, but need to focus on particular niches, for example managing wealth across borders."
A number of financial technology companies are also trying to expand into the wealth management space.
The report found that the percentage of HNWIs with overseas investments has increased since the previous report in 2015, though the average asset allocation had stabilised.
While the Chinese authorities have tightened the rules around capital leaving the country since late last year, there is already a great deal of wealth offshore.
China Merchants Bank's Wang said that IPOs were an important contributor to this, noting that Tencent's stock flotation alone had created 4,000 new HNWIs.
As Chinese private wealth moves offshore, Chinese private banks have followed, opening up a new front in their competition with the international private banks.
"Chinese banks operating overseas can benefit from their relationships with existing domestic clients, but it is too early to say whether it will be international banks or the Chinese banks' overseas branches that will manage the bulk of overseas Chinese wealth," Zeng said.