Shenzhen eyes starring role as China’s premier private-banking hub
The southern Chinese city has set out ambitious plans to become one of the world’s top wealth-management centres. With one of China’s largest onshore pools of private wealth, there is everything to play for.
Shenzhen is big, rich and young – it was little more than a fishing village until the 1980s – but can it become China’s premier private-banking and wealth-management hub?
That certainly seems to be the aim of the city’s political and financial leaders. On January 8, the laboriously titled Shenzhen Municipal Bureau of Local Financial Regulation and Supervision announced that it intended to build an international wealth-management centre overseeing more than Rmb30 trillion ($4.45 trillion) in assets by 2025.
That would include convincing at least 100 blue-chip wealth-management outfits, including global outfits, to set up shop in the tech-heavy city, as well as more than 300 ‘pilot’ qualified domestic and foreign investors – a nebulous phrase that encompasses everything from financial advisory boutiques to wealth-tech start-ups.
If there is a mainland city capable of meeting these outsized goals, it’s probably Shenzhen
The scale of the city’s wealth-management sector today requires a bit of guesswork. Official data puts the total value of assets under management at all Shenzhen-based financial institutions – banks, securities and insurance firms, funds and wealth managers – at Rmb26.6 trillion at the end of 2022, comprising around one-fifth of the country’s total.
The China Development Institute, a Shenzhen-based think-tank, tips that number to top Rmb30 trillion by 2025.
That leaves the city’s cadres with a fair bit of work to do to hit their goal. Still, if there is a mainland city capable of meeting these outsized goals, it’s probably Shenzhen.
Bankers rank the city third in terms of the size of its local wealth-management business, behind Beijing and Shanghai, but ahead of nearby Guangzhou, which it overtook during the past five years.
It holds a lot of cards. The landmark visit of former leader Deng Xiaoping in 1992 and the creation of a national-level ‘special economic zone’ transformed a city that now boasts the country’s second-largest stock market by market cap. It is central to the Greater Bay Area (GBA), which spans Hong Kong and central Guangdong province, and shares a land border with the former British colony.
This month’s announcement is well timed – probably by design.
Wealth Management Connect
After much prevarication, China unveiled Wealth Management Connect (WMC), a cross-border scheme with the aim of promoting global use of the renminbi, and letting millions of mainlanders buy offshore investment products, in September 2021. It had a total initial size, or quota, of Rmb300 billion, with GBA residents allowed to invest no more than Rmb1 million of their personal wealth in lower-risk products, such as equity and bond funds.
With Beijing having re-opened its border with Hong Kong on January 8, WMC can begin to take off.
A select group of global institutions are expected to lead the charge.
HSBC, which launched cross-border services targeting wealthy GBA citizens last October, has the largest onshore private wealth set-up of any Western lender. In Shenzhen, it has a private-banking office as well as a 90% stake in HSBC Qianhai Securities.
The same month, UBS launched WE.UBS, a digital platform offering wealth-management services to affluent mainland clients. Owned by UBS Fund Distribution (Shenzhen) – a wholly owned division of the Swiss firm – it marks the first such platform launched by a global wealth manager in Asia’s largest economy.
In a January 2022 report, UBS projected the total value of investable assets held by high-net-worth Chinese individuals to hit $34 trillion by 2030.
The Hong Kong-based head of China wealth management at a global bank describes Shenzhen as the country’s “most Western” city. It’s certainly one the richest – in its 2022 Global Rich List, Hurun put the number of local billionaires at 113, behind only Beijing and Shanghai. It’s also home to several of the country’s largest privately owned technology firms, including Tencent, Huawei and DJI.
It’s also surely the country’s most private-capital-friendly place.
“All of the new wealth in Shenzhen is generated by entrepreneurs, and it’s widely distributed over a number of industries,” the private banker adds. “It’s coming from company founders listing in the mainland and Hong Kong. Shenzhen entrepreneurs are younger and better financially educated than anywhere else in China.”