Some features of today’s China are a slowing down growth rate, stagnant stock market, and uncertain real estate market, leaving wealthy Chinese few tools to maintain and increase the value of their assets. As a result, though they face restrictions on moving cash assets overseas, many Chinese people still figure out ways to get around these restrictions. In 2014, the amount of cash assets transferred reached US$324 billion.
With the Chinese Yuan’s addition by IMF into the SDR basket on Nov 30th of 2015, Chinese authority will expedite its agenda to free up this currency to flow in and out of the country. The Pilot program is under review to remove the foreign exchange control in six cities and municipalities (QDII2) with eligible individuals, and if this program goes smoothly, it might apply to the entire country in a few years. A CICC forecast indicates that will free up 41Trillion RMB or 7Trillion USD equivalent of cash asset to invest overseas.
According to the FT study, 42% of the wealthy Chinese cited the U.S. as the preferred destination for their cash. They indicated much of that investment would go into businesses, commercial investments and financial products. This will create a tremendous opportunity for many US financial institutions. The question is now, are you ready? A financial institution may want to audit itself with the following perspectives:
- Product and Service: Are you selling to individual or institutional investors? Do US regulations allow Chinese investors to buy your product or service? Even if yes, what are the required compliance standards?
- Marketing: Selling to Chinese individual and institutional investors does not mean you can simply move your current marketing program to China or translate your English materials into Chinese. It means an overhaul and redesign of your marketing program so it is more suitable to Chinese context. As a result of China’s Cyber censorship, instead of getting information from Google, Facebook or Twitter, China has Baidu, WeChat and Microblog. Some US companies’ websites may not be accessible from China due to their IP server, and you may need to consider moving your website to a different server or creating a mirror website in China. You may consider starting from building a few HTML pages for business development purposes, which will then be upgraded to include the major social media when your client base expands in China. With 10+ years experiences with the China market, TE+A is one of the few agencies which can provide one-stop services to such US financial institutions. Such a client has just contacted the firm in the past week and TE+A may see more and more in the coming years.
- Operation: A financial institution should make sure their current infrastructure and system supports Chinese investors, from directly after the point (or preferably even before) their RMB is converted to USD. There are a few online finance companies that have developed an online marketplace where Chinese investors can invest overseas products. Working with these companies might be an inexpensive way to enter Chinese market (this only applies to products for individual investors).
To best compete in this new China market, every aspect along the value chain should be examined in order to server this brand new client segment. It is better to have this internal audit and evaluation done sooner than later, before you risk losing out on this huge opportunity.
Gary Qu, COO