Although the nation's newly emerging wealthy are supposed to be taking the lead in stimulating domestic demand, a recent survey shows that only half of them are active investors and consumers. The remainder do not have enough financial knowledge or high enough education levels to get involved.
According to the survey, conducted by China Merchants Bank and the leading domestic research house www.horizonkey.com, there are about 2.31 million Chinese who have personal or family assets of more than 500,000 yuan (US$60,240).
A sample survey of 1,049 respondents with high incomes was conducted among seven large cities.
However, not all of the affluent respondents are active investors/consumers, the survey showed.
Respondents fell into two categories - active and passive, depending on their wealth management behaviour.
The active comprised 58.2 per cent and the passive the remainder.
Regarding purchasing plans for 2004, there is a significant spending gap between the two groups on large items such as real estate and private cars, and the gap widens as the spending grows.
About 50 per cent of the active groups said they would spend between 80,000 yuan (US$9,638) and 200,000 yuan (US$24,096) this year on real estate and/or vehicles. In the other group, 45 per cent of respondents had the same sentiment.
The gap increases to 15 percentage points when planned spending ranges between 310,000 yuan (US$24,096) and 400,000 yuan (US$48,192).
It reaches 35 per cent when the planned spending exceeds 510,000 yuan (US$61,445).
The two groups' different behaviors in wealth management are in line with their perspectives of economic development, said the report.
Only 55.8 per cent of the active investors/consumers have confidence in the sustainable development of China's economy and 56.5 per cent of them are optimistic about the nation's financial sector.
Attitudes toward wealth management are closely related to educational backgrounds.
More than 60 per cent of those in the active category have an affluent college education.
In comparison, only 42.1 per cent of the people in the affluent group, with junior school education, are active in wealth management.
According to a previous survey conducted by the Association of Private Economy of China, most of the nation's wealthy experienced hardships and the "cultural revolution" (1966-76) when they were young.
The age of the chairmen of boards of directors, on average in the seven cities, is 43 years, and most of the affluent - apart from those engaged in high-tech industries - only have primary or high school educations.
In addition to education, financial knowledge and information about specific investment tools also affects the behavior of investors/consumers, said the report.
Almost 76 per cent of the active group felt they had sufficient knowledge about professional wealth management.
And regarding knowledge of professional financial institutions, 38.7 per cent of the active group said they were not well-informed.
As shown in the survey, the active investors/consumers are more demanding in all financial services categories.
And the top four factors that they are most interested about in terms of financial services are the competency of client managers, wealth management information via short messaging services, the reception halls of wealth management centres and simplified procedures.
It suggests, especially to those banks which have only made efforts to install better equipment, that excellent client managers are important in sharpening the competitive edge of financial institutions.
For the passive group, they favour lectures on financial investment.
The services that rank second and third are individualized personal/family wealth management schemes and wealth management packages.
The results show that insufficient knowledge and information has prevented the passive group from active participation in wealth management.
The nation's financial institutions have been actively promoting consumer credit services in recent years. However, the efforts have produced little results, as proved by the fact that the total volume of consumer goods, in general, grew less rapidly than fixed assets from 1998 to 2002.
This is because China's financial services still lag behind that of advanced countries, including the absence of personal credit systems, insufficient investment in facilities for financial services, and imperfect laws and regulations.
Clearly, the majority of Chinese families, with slight growths in their disposal incomes, are unlikely to improve the investment/consumption ratio within a short period of time.
Therefore, the survey shows that the wealthy, although only accounting for a small proportion of the population, should be given the means to achieve sound economic growth.
(China Business Weekly 11, 2004)
