Chinese Overseas Investments to Nearly Double in 5 years

Chinese Overseas Investments to Nearly Double in 5 years

Record-breaking land bids in Shanghai, Nanjing and Shenzhen and rising apartment prices in some major cities in China may be a cause for celebrating Mid-Autumn Festival for some in mid September. There was a frenzy about apartment purchases with some families resorting to filing “divorce” papers in order to obtain mortgage financing for a 2nd apartment in Shanghai.

While these were somewhat expected given its stock market volatilities, some Chinese have continued to find attractive investment opportunities in U.S. real estate and fixed income products.

JinList expects more Chinese buyers to look to U.S. real estate in the years to come. By 2020, Boston Consulting Group estimates that Chinese allocation to overseas investments relative to investable assets will nearly double to 9.4% from the current 4.8%1. We should expect continued growth of Chinese buyers of U.S. real estate, says Dr. Jin Zhao, CEO of Jinlst.

High Net Worth (HNW) Chinese families with investable assets greater than 6 million RMB (approx. US$900,000) will reach 3.88 million in 2020, an annual growth rate of 13%. What is notable is that their investable assets will grow at a rate of 15% per year, a rate far higher than the 6.5% GDP2.

Even if using an annual GDP growth rate of 5.5%, which is below the official target, China’s consumer economy is expected to expand by 50% to $6.5 trillion by 2020. The incremental growth of $2.3 trillion over the next five years would be comparable to the world adding a consumer market 1.3 times the size of today’s Germany.

In 2015, the Asia-Pacific was the only region to post double-digit growth, as private wealth rose by 13% to $37 trillion. Rising household income rather than asset performance drove the expansion. Despite high volatilities in its financial and currency markets, China remains the principal growth motor in the region.

The ultra HNW3 Chinese have a higher tolerance for risk and are more open to PE/VC, stocks, gold and overseas investments. Among those HNW Chinese who hold overseas assets, real estate and fixed income products are most popular. Financial assets such as overseas stocks, funds, and insurance products are also liked.