McKinsey Reveals the Real Reasons Chinese Buy Overseas Property

21-Nov-2012

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An eternal optimist, Liu-Yue built two social enterprises to help make the world a better place. Liu-Yue co-founded Oxstones Investment Club a searchable content platform and business tools for knowledge sharing and financial education. Oxstones.com also provides investors with direct access to U.S. commercial real estate opportunities and other alternative investments. In addition, Liu-Yue also co-founded Cute Brands a cause-oriented character brand management and brand licensing company that creates social awareness on global issues and societal challenges through character creations. Prior to his entrepreneurial endeavors, Liu-Yue worked as an Executive Associate at M&T Bank in the Structured Real Estate Finance Group where he worked with senior management on multiple bank-wide risk management projects. He also had a dual role as a commercial banker advising UHNWIs and family offices on investments, credit, and banking needs while focused on residential CRE, infrastructure development, and affordable housing projects. Prior to M&T, he held a number of positions in Latin American equities and bonds investment groups at SBC Warburg Dillon Read (Swiss Bank), OFFITBANK (the wealth management division of Wachovia Bank), and in small cap equities at Steinberg Priest Capital Management (family office). Liu-Yue has an MBA specializing in investment management and strategy from Georgetown University and a Bachelor of Science in Finance and Marketing from Stern School of Business at NYU. He also completed graduate studies in international management at the University of Oxford, Trinity College.

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By , Mingtiandi Real Estate,

Reasons for Overseas Investment

McKinsey and Company, along with China Minsheng Bank recently released a study of the investment preferences of Chinese high net worth individuals, and results contradict much of the conventional wisdom regarding China’s wealthy.

While an industry has sprung up around offering immigration services and promises of passports to China’s elite, the McKinsey report found that 86 percent of the respondents to their survey cited diversification of financial risk as a reason for investing overseas. By contrast, only 23 percent cited a desire to immigrate and 16 percent listed their children’s education as a reason for listing overseas.

The number of China’s high net worth individuals – defined as someone with more than $1 million to invest – increased 15 percent annually from 2010 to 2012, according to McKinsey’s estimates. The report foresees the number of this rich folks as rising 19 percent annually from now through 2015, which would create a cadre of 1.9 million red investors by that time.

Around 60 per cent of China’s rich own overseas investments, according to the report, and these investments total an estimated 10 percent of the group’s assets.

The report was based on interviews with 700 high net-worth individuals in 29 Chinese cities, including face-to-face interview with 100 of those individuals.

Disappointingly for the brokers hoping to sell more apartments in Vancouver, London and Melbourne, the report predicts that private equity products should overtake real estate as the most popular place to park the assets of this rich class in the next five years. However, at this time, property still accounts for 31 percent of the invested wealth of China’s elite, according to the report, with basic banking products being the next most popular investment accounting for 26 percent of their assets.

Perhaps as big of a reason as any for Chinese to look overseas for investment opportunities is simply the slowing pace of the Chinese economy, together with the deceleration of the Renminbi’s appreciation versus global currencies.

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