China’s asset management sector to double to US$40 trillion by 2030 as household wealth, pension needs grow, McKinsey says

The growth of the industry will be buoyed by rising household wealth and the growth of the country’s pension system, McKinsey & Company report says
Asset managers should diversify their offerings, enhance services and optimise sales channels to win market share amid fierce competition, McKinsey says

Banking & finance

Iris Ouyangin Shenzhen

Published: 5:30pm, 11 May 2023

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China’s asset management industry will more than double in size to 280 trillion yuan (US$40.4 trillion) by 2030, as the expansion of individual wealth and pension needs requires financial companies to upgrade their products and services, according to a report by McKinsey & Company.

The sector was worth an estimated 130 trillion yuan at the end of last year, the consultancy firm said in the report released on Thursday.

The growth of the industry will be buoyed by rising household wealth and the growth of the country’s pension system. Chinese citizens’ individual financial assets are expected to increase in value at an annualised rate of 9 per cent to 47.5 trillion yuan by 2030, the report said.

“Given the constant rise of domestic [bank] deposits and the wealth management segment, pension reform and incremental capital inflow of overseas capital, China’s asset management industry will maintain steady and prudent growth,” the report said.

“The maturing of the pension system will bring sizeable long-term capital.”

02:12

Working until 70: Ageing in northeast China signals looming pension crisis

China’s rapidly ageing population of 1.4 billion people prompted the government to roll out an expanded private pension scheme in April last year, with banks, funds and insurance companies launching a flurry of new products as they eyed market share.

The expanded scheme would inject at least 120 billion yuan (US$17.8 billion) a year into the country’s asset-management market, securities firm Guotai Junan predicted a year ago, shortly after it was launched.

The so-called second and third pillars of China’s pension system – respectively, enterprise annuities and the private pension scheme – are likely to account for 70 per cent of the country’s total pension market, bringing in 19 trillion yuan in net capital inflow by 2030, according to McKinsey’s report.

The report suggested that mainland China, the world’s second-largest asset management market, offers a lucrative but more competitive business environment for participants, as firms ranging from JPMorgan Chase and Morgan Stanley to Fidelity International and Neuberger Berman seek to increase their footprints there.

Chief executives at leading international asset managers are making efforts to adapt to and keep up with the rapidly changing market in China, McKinsey said, based on its talks with several dozen leaders. They are making good progress in building defensive strategies and enhancing their alternative investment offerings during a time of financial market volatility to meet the more diverse needs of Chinese clients.

They are also trying to focus more on their sales models, developing more innovative marketing channels, digitalisation and providing pension solutions.

But they need to do more to establish their professional research and investment platforms, and diversify their strategy offerings by, for example, paying more attention to sustainable investment, the report said.

They should also tailor more to customers’ demands with after-sales quality control and services, optimise their sales channels and nurture and maintain talent, it added.