Chinese clients are increasingly eyeing global investment opportunities for diversification and higher returns amid volatile domestic markets.

While capital controls remain a barrier to the movement of Chinese capital, lack of knowledge, language skills and trusted partners are also major hurdles for Chinese clients eyeing overseas investments, industry experts said at the APB Summit 2024 in Hong Kong.

“In terms of the US and Japanese markets, [Chinese clients] read headline news, and they get scared a lot of the time. So, in terms of understanding international markets, you can pretty safely say it’s a blank sheet of paper,” said Andy Yin, head of global private markets at Chinese wealth manager Noah Holdings.

Andy Yin, Noah Holdings

Chinese clients often do not have trusted partners for guidance, Yin added. And while some already have family offices, their teams have been primarily making investments inside China.

“When they go out, and capital goes out, even their family offices cannot give them much help,” Yin said.

Yin explained that while Chinese investors are open to advice, with most of the clients being first-generation entrepreneurs in their mid-40s to 50s, without overseas education, they often run into language and knowledge barriers.

“The barriers are still there. We still have a lot of work to do. But once that’s done, Chinese private wealth will become an even more mainstream source of capital for the world market,” Yin believes.

Staying conservative

Peter Tung, regional head, Greater China and North Asia, private banking, at Standard Chartered, also noted that Chinese clients are becoming more interested in learning about how to make overseas investments. “They want to have access now. And they’re now more willing to hear our presentations on some of the best-in-class managers that we have on our platform,” he said.

David Louie, EFG

David Louie, Hong Kong CEO and head of North Asia at EFG, has also seen clients prioritise safety and diversification amid market volatility. “When you ask clients their risk appetite, they always say – ‘I’m very conservative, all you have to do is give me 20%!’ Nowadays, you don’t hear them say that anymore,” he said.

Also acknowledging Chinese clients as being still new to international investments, Louie believes this brings opportunities for EFG to add value for clients. “We’re stationed offshore. We are a Swiss bank, and we have all the expertise because we have been servicing high net worth clients in Europe for many years,” said Louie.

Hong Kong still competitive

Despite seeing private capital move to Singapore two years ago when Hong Kong was still opening up from the pandemic, Tung thinks Hong Kong has now caught up. He pointed out that most family offices, especially Chinese ones, are now looking more at Hong Kong because of its diverse investment opportunities beyond traditional products.

“Yes, they’re looking for traditional private banking services and capital market products, but every bank has that. What they want is access to private markets, private credit – the type of investments that not everybody has,” said Tung.

Peter Tung, Standard Chartered

Tung believes Hong Kong still has an edge in this aspect due to its proximity to China and its track record. However, he also noted that clients with a family office setup in Hong Kong are also looking at different booking centres.

“I’m seeing more family offices built here, but the caveat is that they’re also having a booking centre in Singapore, and now they’re having booking centres in Dubai,” said Tung.

He highlighted that for Chinese clients, Hong Kong is the ideal location to make the first move due to the ease of travelling, which helps build trust.

“I can go to China every single day and meet clients. It’s fairly easy to go to Singapore, but then it may not be as easy. For some clients, they want to see who they are dealing with as a lot of clients in China nowadays are looking for safety rather than anything else,” said Louie.

This trend is further reinforced by the Hong Kong government’s policies and family office initiatives, said Louie. However, while the majority of Noah’s clients are still leaning towards Hong Kong, Yin noticed clients who go to Singapore tend to be on the richer side and have young kids, signalling Singapore might be a more popular choice in terms of education and safety.

“They have [to have] more money because the cost of setting up infrastructure is more expensive in Singapore and the talent is short,” said Yin.