Chinese investors are putting their money mostly in real estate

Real estate remains the number one asset class that Chinese investors put money in. Stocks at the other hand still rank very low on the popularity list for China investors.

Mainland Chinese assets under management grew 22 percent last year to $4.2 trillion, outpacing growth of 13 percent in North American assets under management. The North American market remains the largest at $37.4 trillion, but China has jumped to fourth place from eighth place in just five years, and many expect Chinese assets under management to triple by 2025 to become the second-largest market.

The composition of investing in China looks quite different from that of the U.S. While equities account for a major portion of American portfolios, Chinese investors have preferred real estate investments. Wealthy Chinese families have approximately 65% of their wealth invested in property. This is very different from rich Americans who only have 49% of their wealth in real estate.

Besides real estate, China's wealthiest are also starting to invest in alternative investment products. A leading Chinese wealth manager for high net worth individuals told CNBC that about 60 percent of assets under management are in alternative investments such as private equity and venture capital. The heavy allocation to private investments makes sense in a country of many fast-growing young companies soon to go public or get acquired. Last year, many wealthy Chinese citizens invested in so-called unicorns including Meituan Dianping — which combines features similar to Groupon, Yelp and Seamless and is expected to raise more than $4 billion in a Hong Kong IPO — and video streaming platform iQiyi , which held a $2.3 billion public offering in New York in March.

Chinese high net worth investors are also allocating more assets overseas. This makes sense as Chinese are becoming more sophisticated and are looking to add overseas assets to their portfolio.

But the future development of the Chinese asset management industry still depends on government regulation. Beijing is trying to encourage more stable investment in the stock market, including from foreigners, and the government is increasing supervision of financial services firms.  It remains to be seen whether wealthy Chinese will ever accept investing in their volatile stockmarket or stick to their typical real estate investments which are much more stable and predictable.

Source: CNBC, Aug 15 2018