China has 670,000 dollar millionaires!

China has the third largest number of dollar millionaires in the world, after the United States and Japan, with the number touching 6.70 lakh (670,000) in 2009, an increase of 60 per cent compared to the previous year.

China already has the second highest number of billionaires.

A study by the Boston Consulting Group (BCG) said at the end of 2009, China had 670,000 households with more than $1 million wealth, up 60 per cent from the same period in 2008.

The country's composite wealth grew by about 28 per cent to about $5.4 trillion during the end of 2009.

. . . 

"The fast increase is driven by China's strong economic growth, the rise of private-sector enterprises and the development of capital markets," state run China Daily quoted Frankie Leung, partner and managing director of BCG as saying.

Meanwhile, the Forbes magazine said China has about 64 billionaires against 117 in the United States.

According to BCG's research, entrepreneurs account for the majority of China's high-net-worth population over $1 million.

But there are growing numbers of wealthy Chinese, such as executives, professional investors and the independently wealthy, who have different sources of wealth.

. . . 

In addition, the mix of entrepreneurs is diversifying beyond real estate, manufacturing and commodities into industries such as the pharmaceutical and high technology.

Also wealth is spreading beyond coastal regions to second-and third-tier cities throughout China, it said.

In 2009, Guangdong, Zhejiang, Jiangsu and Shandong provinces, and Beijing and Shanghai accounted for more than half of millionaire households' wealth.

But the central and western regions are expected to attract more investment during China's 12th Five-Year Plan (2011-2015).

. . . 

This would be laying the groundwork for wealth to spread across the nation, and, more specifically, to cities away from the coast.

Despite its remarkable growth, China's composite wealth still has tremendous room to expand, it said.

China accounts for only five per cent of global wealth, less than its share of the global GDP (7 per cent).

As for millionaire households, they account for only about 0.2 per cent of all Chinese households, a far lower concentration than in the United States (4.1 per cent) and Switzerland (8.4 per cent).

. . . 

"The sheer volume of new wealth presents an attractive opportunity for growth, but wealth managers should focus on the nuances of how and where this wealth will be created," Leung said.

Hong Kong has emerged as a popular investment destination and place of residence for wealthy mainlanders, many of whom have homes there.

The city has become an increasingly important offshore wealth centre for the mainland's wealthy.

"This is a key opportunity for foreign wealth managers, as well as for (mainland) wealth managers who have a presence in Hong Kong," Nelson Choi, principal of BCG said.

. . . 

"Wealth managers need to assess whether their current capabilities will allow them to grasp this growing opportunity," he said.

But China's onshore market may not contribute significantly to the growth and profitability of overseas wealth managers in the near future.

This is due to strict regulatory constraints on products that can be sold, he said.

Wealthy Chinese, however, prefer to keep most of their assets onshore due to the appreciation potential.