Wealth Management in China Has Huge Potential: Top Regulator

The wealth management industry in China may enjoy a prosperous future, but it is still premature and facing many challenges.

The wealth management industry has huge potential in China, but it needs to learn from international experience, China's top securities regulator said recently.

A Sunrise Industry

Shuqing Guo, Chairman of the China Securities Regulatory Commission (CSRC), considers the wealth management sector in China as a sunrise industry.

"The wealth management industry in China is very promising," said Guo at the inauguration ceremony of the China Securities Investment Fund Association recently in Beijing.

"If China can shunt half of the more than 80 trillion yuan ($6.3 trillion) in bank deposits into the wealth management industry, the scale will be significantly considerable."

At the end of 2011, the net asset value of China's securities investment funds was 2.19 trillion yuan, while the value of banks' wealth investment products was 4.57 trillion yuan, together with 4.8 trillion yuan in trust assets and 6 trillion yuan in insurance assets, according to the CSRC.

There is huge potential to develop a comprehensive wealth management sector, as individual investors and companies seek higher returns on assets, analysts said.

From 2001 to last year, the average annual return on mainland shares was 7.8%, and the number was 6.7% for corporate bonds and 3.6% for treasury bonds, according to the top Chinese securities regulator.

Still Premature

Although Guo believes the wealth industry in China may enjoy a prosperous future, he thinks the industry in China is still quite premature and needs to learn from the established international counterparts.

"China's wealth management industry is in its infancy and still far from meeting the needs of the market," said the CSRC chairman.

"At present, the wealth management industry of mature overseas markets has entered the era of diversified investment management while China?s fund industry just began transformation and is far away from the mature overseas markets."

Compared with overseas institutions, China?s wealth management industry not only lacks knowledge, experience and talents but also the investment management institutions worthy of the trust of the markets, Guo said.

The financial enterprises that can keep their promise and put their customers at the first place are also rare, he added.

"China should learn from international experience, based on its own specific circumstances," said Guo, a visiting scholar at University of Oxford in the 1980s.

In conclusion, the top Chinese securities official said that the CSRC will continue to optimize the external environment conducive to the development of the wealth management industry in China and strive for a breakthrough in terms of expanding the investment objects of funds, relaxing the operational constraints of investment, optimizing the corporate governance, and standardizing the industry service behaviors.

Copyright Zhenyu Li. Contact the author to obtain permission for republication.

Zhenyu Li - Zhenyu Li is an internationally recognized bilingual culture columnist. He pens the "Created in China" column for Suite101.

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