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China's rich, silver lining on turbulent global wealth market

By Cheng Yunjie (Xinhua)
Updated: 2008-11-01 14:25

As recession is hitting, global wealth measured as household financial assets is expected to shrink 14 percent from last year's $109 trillion to $97 trillion this year, reversing a six-year-long upward trend.

Emerging markets and China in particular are likely to represent the strongest potential for continued growth in wealth, according to the latest Global Wealth Report 2008 of the Boston Consulting Group (BCG).

North America -- epicenter of the financial crisis -- and Europe would remain the wealthiest regions but the size of their aggregate wealth, about two-thirds of the world's total in 2007, was expected to continue dipping in the next five years.

However, the sustained expansion of the Asia-Pacific region (excluding Japan), was projected to grow eight percent a year on average, the fastest among all emerging markets - which also include Middle East, Africa and Latin America - would largely offset the declines in the wealthiest regions and help the global wealth market to secure an average rise of one percent every year to 2012.

"Given further declines in the financial markets and the economy, the full impact on global wealth may not have yet been fully observed," Tjun Tang, partner and managing director of the Boston Consulting Group, told Xinhua.

He explained that the recovery of wealth would mainly rely on three factors: economic growth -- the first and foremost driver of wealth creation, investment performance, typically driven by equities, and savings rates which were quite good structurally.

With its 391,000 wealthy households (defined as owning at least $1million-worth financial assets ) possessing $1.4 trillion in total last year, China has ranked fifth in the world in terms of millionaires, ahead of many developed countries and only behind the US, Japan, United Kingdom and Germany.

Meager as it may be if compared to the richest US market which boasts of 4.884 million wealthy households with aggregate financial assets of $17.1 trillion, the wealth market of China was expected to maintain a solid growth momentum in the long term.

"The US and European economies are likely to enter more recession conditions in the immediate term, whereas the Chinese economy will slow but continue to grow. Many economists are projecting roughly 8-9 percent GDP growth in 2009 and wealth creation relies heavily on GDP growth," said Tang.

As the Chinese households tend to stash away larger proportion of cash than other developed markets, wealth in China would hold up relatively better than wealth in the US while stock markets were tumbling down.

Given that the wealth business onshore in China has been much less penetrated by the sub-prime debts than in other developed markets, the study covering 62 markets representing more than 98 percent of global GDP concluded that there was still growth to pursue for wealth managers in the Chinese market.

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