Financial assets held by Chinese households dropped last year for first time since 2000, Allianz says
- Mainland China drops three places to 34th in global ranking of richest countries by financial assets per capita
- Singapore, in third place, ranks as Asia’s richest country for the first time, replacing Japan
Financial assets held by Chinese households dropped last year for the first time since the turn of the century, as a result of the US-China trade war and a slowing economy, German financial services company Allianz said in a report on Wednesday.
Mainland China last year dropped three places to 34th in a global ranking of the richest countries by financial assets per capita compiled by Allianz. Singapore, in third place, ranked as Asia’s richest country for the first time, replacing Japan, while the United States came in at the top, because of a strong dollar.
China was one of the biggest losers. Declining assets and rising liabilities led to a 10.2 per cent decline in the country’s net financial assets. The gross financial assets of Chinese households dropped by 3.4 per cent in 2018, for their first decline since 2000.
“Last year’s decline in financial assets was due to the weak performance of the Chinese stock market, and regulatory measures [aimed at strengthening ] financial stability,” Michaela Grimm, senior economist at Allianz and a co-author of the report, said in an emailed comment.
“However, this should be only a temporary setback. Given the backlog demand and the need of China’s ageing population for private provision, China will remain one of the countries with the highest growth of private households’ financial assets worldwide.”
China, Hong Kong high-net-worth individuals led decline in global wealth last year
Private financial assets fell across the globe last year, slipping by 0.1 per cent for their first decline since the 2008 financial crisis, according to Allianz. The decline was triggered by a sharp fall in securities – mainly equities, investment funds and wealth management products – of 4.4 per cent across the world, the report said.
Meanwhile, loans held by Chinese households grew 18.2 per cent year on year, the highest among all countries in the region.
“Debt dynamics in Asia, and particularly in China, are concerning,” Patricia Pelayo Romero, a co-author and economist at Allianz, said in the report. “Chinese households are already relatively as indebted as, say, German or Italian ones. The last time we had to witness such a rapid increase in private indebtedness was in the USA, Spain and Ireland shortly before the financial crisis.
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“However, compared with most industrialised countries, debt levels in China are still markedly lower. There is still time to cope with the development and avoid a debt crisis,” Romero said.
“The increasing uncertainty takes its toll. The dismantling of the rule-based global economic order is poisonous for wealth accumulation. The numbers for asset growth also make it evident – trade is a no zero-sum game. Either all are on the winning side – as in the past – or all are on the losing side – as happened last year. Aggressive protectionism knows no winners,” Michael Heise, Allianz’s chief economist and a co-author, said in the report.
Singapore rose 13 places last year, as compared with 2000, and reported a 4.4 per cent year on year increase in net financial assets per capita to €100,370 (US$110,756).
Hong Kong billionaire class shrinks the most as trade war wreaks havoc on markets
Financial assets held by households in Japan, Mexico, the US and Canada, as well many European countries, also dropped.
Savers around the globe have found themselves in a bind, due to the escalating trade war between the US and China, Brexit and increasing geopolitical tensions, the tightening of monetary conditions and the normalisation of monetary policy, according to the report.
“The degree of uncertainty that we’re seeing in the world is likely to impact [wealth],” said Stewart Aldcroft, chairman of Cititrust Limited. “One of the concerns that we are seeing a lot of is that in the US, there’s a belief that there is potential for a recession in the next year or two. That in itself may cause a decrease in wealth,” he added.
