China's rising rich favor traditional investments

The increasing number of rising affluent people in China have confidence in their investments, according to a survey released on Tuesday, but financial experts suggested they should diversify their portfolio and prepare for risks.

The China Rising Affluent Financial Well-Being Index, which tracks investment sentiment among people earning between 125,000 yuan (US$17,549) and 1 million yuan, was 65.96 this year, down 2.2 points from last year. The survey was released by US financial consultancy Charles Schwab in partnership with the Shanghai Advanced Institute of Finance under Shanghai Jiao Tong University.

In contrast with the main index, the confidence sub-index rose to 69.88 from 68.85 in 2018 and 68.10 in 2017, a record high. Conducted by Nielsen, the survey interviewed 3,800 respondents in 15 cities across China.

“The financial decisions of the rising affluent have a profound impact not only on their futures, but also the future of China’s development,” said Wu Fei, a professor at SAIF.

Traditional forms of investment remain the strong preference among the rising affluent, with real estate continuing to grow as the preferred asset, while other financial products such as stocks and bonds declined.

The survey showed that only 9 percent of respondents indicated a preference for financial products this year, compared with 36 percent in 2018, while there was an increase in preference for real estate over financial products by 8 points.

At the same time, “children’s education” has replaced “money for emergencies” to be the top financial goal.

“The current investment pattern of the rising affluent is demonstrated by an increasing reliance on savings and real estate, however, this approach may be tested by the changing macroeconomic conditions,” said Lisa Hunt, executive vice president of international services at Charles Schwab.

She said people should set more reasonable goals through a combination of modern financial planning and education, and there should be more access to trustworthy financial services.