If China discovers savings

China is a country with very high savings rates, as the data show. But how much of this capital could be managed by the Western savings industry?

China, a country devoted to saving

When it comes to saving, the Chinese government certainly sets a good example for its citizens. The International Monetary Fund (IMF) has calculated that, over the past three years, China has intervened in the economy much less than Western countries. A study published by the German investment company DWS analysed the IMF data. The experts asked themselves how is it possible that an authoritarian country like China intervenes less in the economy than democratic countries? DWS's answer was that China has been able to develop more targeted and effective investment interventions, focusing on technology and the fight against climate change. So, despite the many limitations imposed on investment, the Chinese government has intervened less in terms of supporting the economy than the US or European governments.

Asset management in China, an undiscovered El Dorado

Chinese private savings are also the envy of many other countries. In 2021, the savings rate is estimated at around 36%. The World Bank speaks of 45% of GDP overall. As someone wrote, in the eyes of Western asset managers, China could look like a real El Dorado: 680 million potential retail clients estimated by the Industrial and Commercial Bank of China and an investable asset (in 2030) of 70 trillion dollars calculated by Goldman Sachs. These numbers could not go unnoticed: Goldman, BlackRock, JP Morgan, Morgan Stanley and UBS and Deutsche Bank have ventured into the Chinese market. The results, so far, however, have been rather disappointing in the face of great expectations.

Will the crisis in the property market make the Chinese discover asset management?

Fortune magazine reports a figure from the investment firm Loomis, Sayles & Company that may explain the reasons for the lack of success of Western asset management in China: 70% of Chinese private savings end up in the real estate sector. This explains the very strong growth of urbanisation and the gigantic rise of the construction industry, which contributes at least 30% to China's GDP. When we talk about the real estate sector in China, however, we can only note that this growth is coming to an abrupt halt: the now imminent bankruptcy of the giant Evergrande and the Kaisa group risks dragging down a large part of the previously flourishing industry, which has changed the face of many Chinese cities.

What will happen at this point is hard to say, but it may well be, as Fortune claims, that the Chinese, disappointed by an inflated property market in crisis, will begin to seriously consider the advisability of managed investments. This would open up a goldmine for many banks and asset management companies. One of the largest banks in the Middle East, First Abu Dhabi Bank (Fab) of the United Arab Emirates, has just landed in Shanghai. Who knows if the Fab will be more successful than its European and American competitors.