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Growing opportunity for IFCs as a result of Chinese internationalisation

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Chinese investors are increasingly looking for greater diversification beyond the mainland and specialist expertise for structuring their global private wealth, real estate and corporate affairs, according to research by Jersey Finance.

The white paper, “The Internationalisation of Chinese Wealth – 2016”, is based on proprietary research conducted by Jersey Finance and Hubbis, a provider of events and content for Asia's Wealth Management community. It involved a range of advisers in Hong Kong and Singapore, and was launched at Jersey Finance’s Asia Roadshows in Shanghai and Hong Kong on 18 and 20 October to an audience of almost 200 senior finance and business professionals.
 
Designed to examine the driving forces behind Chinese investors’ increasing appetite for foreign investment, the paper found that Chinese high net worth (HNW) and ultra-high net worth (UHNW) individuals are increasingly wanting access to a full suite of global wealth management services.
 
The paper reveals that there is an increasing need for business succession planning, with 43 per cent of practitioners confirming that is their main focus, followed by a mix of insurance/protection, estate planning, and legacy planning – which are roughly equally weighted.
 
Asset planning, family succession and the diversification of wealth, meanwhile are the key drivers for much of the cross-border trust structuring out of China. 25 per cent is tax-driven, while the family office has become an increasingly popular option amongst UHNWs in China (38 per cent of respondents), followed by traditional trusts (29 per cent) and private trust companies (22 per cent).
 
Looking ahead five years, respondents predicted this trend will be exacerbated, with just over half of Chinese families opting for family office structures.
 
The report also highlights some of the challenges faced by Chinese investors, including a significant amount of education needed around international regulation such as the Organisation for Economic Co-operation and Development’s (OECD) Common Reporting Standard (CRS).
 
Some 80 per cent of respondents said that, combined, a lack of good advice and starting a discussion about international wealth were the two most significant hurdles holding Chinese clients back when it comes to wealth transition, while the biggest misconception Chinese families have with international wealth structuring is that it involves a ‘loss of control’ (72 per cent of respondents). In addition, respondents believe that maintaining compliant structures in an increasingly transparent and compliance-driven world is a major challenge
 
Richard Corrigan, interim director of financial services for the Government of Jersey, who hosted the Asia Roadshow events, says: “As China’s HNW and UHNW individuals take an increasingly active role in their own investments, there are signs that more of them are entrusting a larger share to wealth professionals, both domestically and through international finance centres (IFCs), especially in the current volatile environment. We believe there is a stronger need for first-class IFCs and financial practitioners to provide a full suite of wealth management services – including estate and wealth planning, corporate finance and real estate to serve the needs of Chinese wealthy individuals.”
 
Geoff Cook, CEO, Jersey Finance, adds: “Our roadshow events in Asia this year were particularly useful, as we were able to use these latest findings to illustrate the role Jersey can play in meeting the rapidly evolving needs of Chinese investors. Understanding around sophisticated structuring and important topics such as transparency is still at a relatively developmental stage in the Chinese market, but we feel Jersey is well placed not only to help investors understand those regulatory requirements, but also to help fulfil their cross-border wealth, estate planning, investment and family office requirements in a well-regulated environment.”

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