Wishing you a happy and prosperous year of the monkey!
Chinese communities across the globe are celebrating the lunar New Year with feasting, worship, fireworks and visiting friends and families. But what does the Year of the Monkey have in store for China?
Golden decade
Much has been said about the significant shift in relations between Great Britain and China. It should be the beginning of what is tipped to be a ‘golden decade’ for trade and diplomacy, however 2016 has not started well for China’s stock market.
With Chinese New Year just around the corner Andrew Henton, Director at Louvre Group, looks back at 2015’s PwC China-UK CEO Dialogue summit in Beijing and ahead to what the future might hold for finance businesses moving into the market.
New era for Anglo-China relations
Osborne’s visit to China and President’s Xi’s subsequent groundbreaking trip to Britain cemented a shift in relations between the two countries. Those behind the scenes observed that this was no simple public relations exercise and that the shift wasn’t just about doing deals, although a total of RMB391.6 billion of contracts were signed during that visit. It has been described as a new era and the significance of this has left the Americans a little disconcerted – reinforcing the idea that this is more than diplomatic lip service.
According to the Financial Times, China is reportedly set to invest £105 billion in UK infrastructure by 2025 with energy, property and transport the biggest recipients. There has been an increase in young Chinese entrepreneurs setting up businesses in the UK, with the intention of expanding back into China when the time is right. Chinese investment in UK property and institutions like Premier League football clubs is at an all-time high.
Opportunities and a new trust
Relations are warming up, trust is growing and that is key to doing business in the region. At last year’s PwC China-UK CEO Dialogue there was a real desire to do deals. This appetite will surely continue to grow over time as relationships develop further and trust deepens.
The Chinese stock market volatility has hurt domestic Chinese retail investor confidence, however this loss of confidence presents a huge opportunity for fund managers and the fund administration sector. Collective investment funds are a safer way for retail customers to access the stock market and offshore administrators and managers can play a role in attracting non-domestic investors.
Huge growth
Let us not forget that the predicted 6-7% economic growth figure is huge – the equivalent of a new economy the size of Switzerland each year. Even if the growth percentage drops further, it will still be a larger percentage than the US or UK economic growth predictions. China should also be ahead of the global economic growth, which has recently been downgraded by the IMF to 3.4%.
A shift from investment to consumption will see an increase in Chinese buying services and the fiduciary sector is set to benefit. Guernsey’s links to the City of London should also play well for the offshore centre in the future.
Industry shift
In the private wealth sector, Guernsey trust law is very established and comprehensive. The Chinese market is now ready to consider asset protection and Guernsey should be able to take advantage. The private wealth industry in China doesn’t exist as we know it because until recent years the focus has been on raising capital. That has now switched to wealth growth and succession planning but fiduciary is still in its infancy.
The concept of a trust is not ‘innate’ to Chinese nationals, however if a structure offers something of value to a client – asset protection, securing wealth over generations etc. – then their interest in fiduciary services will grow. The home jurisdiction of that service provider will be less pertinent than the strategic value of the structure, giving offshore jurisdictions like Guernsey a good basis for market penetration.
Shanghai centre
Hong Kong currently remains the gateway for investment in and out of mainland China but Shanghai’s role as the country’s finance centre continues to grow. For businesses entering the region a presence is essential. Frequent face-to-face meetings are the norm in Chinese business relations and it’s important to be seen to commit to the region. Louvre’s new, larger office in Hong Kong will consolidate our long-term plans for Asia.
Looking ahead
The fund, fiduciary and family office opportunities in China are unquestionable and Louvre Group has been putting its Chinese business strategy in place for some time now. Whilst the industry is looking East, Louvre’s outlook is more global. We believe our international expertise, coupled with simple products and the right structures, has great appeal for a Chinese market that is looking beyond its borders and into the future of family wealth.
Marco Ferreira, Louvre Group’s Director in Hong Kong, concludes: ‘Louvre is committed to developing our business in China. We are not going to be distracted by the noise around China’s economic slow-down. Taking a long-term view, opportunities in the fund and private wealth sector continue to grow and we look forward to the Year of the Monkey. Happiness and prosperity – gong-sshee faa-tseye!’