aubanksJennifer Zeng – China Industries

Luck, the proverb goes, is what happens when preparation meets opportunity. And if the Australian business community hopes to be lucky, it should be maximising the opportunities that are flowing from China.

China now has over a million high-net-worth individuals, with individual, investable assets in excess of RMB 10 million, or approximately $US1.6m. The proportion of those investing overseas has doubled over the last four years. Almost half of those already investing overseas plan to increase their offshore investments — and Australia is on their radar.

There is a misconception in Australia that Chinese investors are chiefly interested in investing in overseas property. While Chinese investors have indicated that close to a one-quarter of their overseas investments are in property, 70 per cent are in other holdings in financial products, including stock, fixed income products, structured products and hedge funds.

The newly wealthy understand the dynamics of investing and are looking to diversify their asset classes in a global market. The financial market turbulence over the past few years has caused them to re-evaluate their risk-to-return expectations and look to overseas markets, where they can realise steadier returns.

Australia is the Chinese investor’s third-favourite offshore investment destination, behind Hong Kong and the US, and the financial services industry stands to reap the benefits.

The percentage of high-net-worth Chinese entrusting their wealth to high-end wealth management institutions jumped to 65 per cent in 2015, up from just 25 per cent in 2009. But while the financial institutions in Hong Kong work hard to attract their most lucrative neighbour, Australians appear comparatively disinterested.

To capture these opportunities, Australian businesses must master a few simple service principles. Brand, expertise and the right investment opportunities are the most important criteria for Chinese HNWIs.

Australian wealth managers are well positioned to offer local and global investment expertise, but they need to tailor their offerings to attract Chinese customers. Broadly speaking, Chinese investors still prefer personalised and private relationship management and adviser services in offline channels, but they are increasingly using online channels, especially mobile internet, for investment information and banking services.

Institutions with language capabilities and cultural connections will have an advantage when appealing to the Chinese market. These services will be an important part of attracting and retaining Chinese clients.

There are certain local industries that might be of particular interest to Chinese direct investors.

The new wave of HNWIs has grown rich in China from industries such as IT, biotechnology and renewable energy. These individuals are characterised by an aggressive, even entrepreneurial, investment style. The coincidence of their expertise with Australia’s post-commodity boom strengths is unmissable and points to exciting possibilities for Australian industries, including advanced manufacturing, food and agribusiness, medical technologies and pharmaceuticals.

The big fund managers and bank financial advisers are well placed to take these opportunities to Chinese investors.

Businesses that plan to pitch to the Chinese market and actively court investors will secure the lion’s share of the renminbi boom. Australian banks and financial institutions could and should be doing much more to lay the foundations for their own luck.

Jennifer Zeng is a senior leader in Bain’s Financial Services practice and co-author of the firm’s recent report The Evolution of China’s Private Wealth Market.