Hong Kong, NYC will be mag­nets for wealthy: re­port

China Daily (Canada) - - ACROSSAMERICA - BY MICHAEL BAR­RIS in New York michael­bar­ris@ chi­nadai­lyusa.com

Call it a trans-oceanic chang­ing of the guard.

In an­other 10 years, Hong Kong Spe­cial Ad­min­is­tra­tive Re­gion will over­take Sin­ga­pore as the city that mat­ters most to Asia’s wealthy, ac­cord­ing to a new re­port. And in a big trans-At­lantic change, New York will dis­place Lon­don as the world’s pre­mier des­ti­na­tion for the ul­tra-rich.

“De­spite the pro­lif­er­a­tion of eco­nomic suc­cess sto­ries across Asia, the dom­i­nance of China is un­avoid­able and Hong Kong’s un­of­fi­cial role as the por­tal be­tween its big brother and the rest of the world will en­sure the grow­ing dom­i­nance of the city over the next decade,” the 2014 Wealth Re­port by UK real es­tate con­sul­tancy Knight Frank said.

The re­port, re­leased this week, is based on a sur­vey of the at­ti­tudes of more than 23,000 ul­tra­wealthy in­di­vid­u­als, those with $30 mil­lion or more in net in­vestable as­sets. These ul­tra high net worth in­di­vid­u­als, or UHNWI, are worth on aver­age $68 mil­lion each, and rep­re­sent more than $1.5 tril­lion in com­bined wealth, ac­cord­ing to the re­port.

The re­port found that the rich in China keep get­ting richer. Many, how­ever, are look­ing for ways to give more of their money to de­serv­ing causes.

“Many UHNWI in China are def­i­nitely search­ing for new ways to give more back to so­ci­ety,” said Lawrence Wong, the al­ter­na­tive chief ex­ec­u­tive and head of busi­ness for pri­vate bank­ing with Bank of China In­ter­na­tional Ltd, who is a mem­ber of Knight Frank’s global wealth panel.

As China’s wealth in­creases, rais­ing the level of phil­an­thropic ac­tiv­ity, so does its level of lux­ury-goods spend­ing, the re­port showed. It quoted Torsten Muller-Otvos, CEO of Rolls-Royce Mo­tor Cars, as say­ing that much of the pres­ti­gious au­tomaker’s record 2013 per­for­mance was driven by emerg­ing mar­kets, with sales up 11 per­cent in China.

Among re­spon­dents with Chi­nese clients, 45 per­cent said that their clients’ in­ter­est in French vine­yards was grow­ing, re­flect­ing wealthy Chi­nese’ new­found ap­petite for wine.

The slow­down in the Chi­nese econ­omy has prompted spec­u­la­tion over the chal­lenges that the world’s sec­ond-largest econ­omy will con­front in the years ahead. China’s lead­er­ship has said its goal is to shift its econ­omy away from de­pen­dency on ex­ports and largescale govern­ment in­vest­ment and to­ward do­mes­tic con­sump­tion and the open­ing up of con­sumer credit.

The coun­try’s po­lit­i­cal lead­ers need to “en­gen­der con­fi­dence in their abil­ity to steer the na­tion on a course to­wards sus­tain­able eco­nomic ex­pan­sion”, ac­cord­ing to the re­port.

Even with the hur­dles fac­ing China, its in­flu­ence should not be un­der­es­ti­mated, ac­cord­ing to Jim O’Neil, of Gold­man Sachs Group Inc. “Al­though grow­ing at a rate of around 7 per­cent, less than dur­ing the past 30 years, China will add an ex­tra $1 tril­lion to global GDP ev­ery year this decade,” O’Neil said. “It’s the equiv­a­lent of adding an­other Ger­many and Ja­pan to the world by the end of the decade.”

Ou­liana Vlasova, chief an­a­lyst at WealthIn­sight, said the out­look for wealth cre­ation in China is pos­i­tive. “In terms of fu­ture hotspots, China is en­cour­ag­ing the de­vel­op­ment of the fi­nan­cial sec­tor, which is the prime source of wealth and pros­per­ity for many global mar­kets,” the an­a­lyst said.

WealthIn­sight, a web­site pro­vid­ing data on high net worth in­di­vid­u­als, fore­casts that the num­ber of bil­lion­aires in China will sky­rocket 80 per­cent by 2024, to 322 from 179 last year. The num­ber of US bil­lion­aires is pro­jected to surge 21 per­cent to 503 from a world-leading 417 in 2013. The num­ber of UHNWI will sky­rocket 80 per­cent in China in the next 10 years.

Re­forms an­nounced by the Chi­nese govern­ment de­signed to in­vig­o­rate the state-owned fi­nan­cial sec­tor and al­low pri­vate own­er­ship of banks will “in­evitably lead to the avail­abil­ity of credit to the grow­ing mid­dle class”, Vlasova said. This trend will see their spend­ing power rise while pro­vid­ing a new source of rev­enue for UHNWI, ac­cord­ing to the re­port.

The growth of UHNWI in China and In­dia, cou­pled with a 144 per­cent in­crease in In­done­sia and a 166 per­cent hike in Viet­nam, will help push the to­tal num­ber of UHNWI in Asia up by 43 per­cent. De­spite a slow­ing in the pace of US growth, the US will still top the charts for the num­ber of UHNWI in 2023, with an ex­pected 47,468 in­di­vid­u­als, three times as many as China. In terms of centa-mil­lion­aires and bil­lion­aires, the US is also on top, with 13,807 and 503 re­spec­tively.

“Even if things do slow down a bit, I don’t think there is cause for con­cern,” Wong said. “USChina trade keeps on grow­ing, busi­ness is be­com­ing more trans­par­ent and Chi­nese UHNWI are be­com­ing more com­fort­able deal­ing with in­ter­na­tional mar­kets.”

e pro­por­tion of re­spon­dents ex­pect­ing the sta­tus quo to be main­tained rose to 34 per­cent — re­flect­ing on­go­ing con­cerns about the ro­bust­ness of the eco­nomic re­cov­ery and whether last year’s eq­ui­ties bounce can be sus­tained, ac­cord­ing to the re­port.

Three quar­ters of the sur­vey’s re­spon­dents — pri­vate bankers and wealth ad­vi­sors — said their UHNWI clients’ net worth had in­creased. Just 4 per­cent said it had fallen.

The re­port said the key Chi­nese real es­tate mar­kets staged no­table re­cov­ery in 2013 af­ter a slight pause in 2012.

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