Jacqueline Shek, Executive Director, Trust Services, at Zedra on why the city state continues to be a key gateway for global opportunity
Hong Kong plays a leading role as a global finance and business centre and is set to continue to do so, with business booming among high-net-worth and ultra-high-net-worth Chinese families seeking sophisticated wealth-planning solutions.
In September, Hong Kong has once again regained its position ahead of Singapore, ranking fifth among 111 centres in the Global Financial Centres Index report from London-based thinktank Z/Yen Partners and the China Development Institute.
The city was among the top five centres in terms of the business environment, human capital, infrastructure, financial sector development and reputation, and it was first in terms of trading, according to the report.
Strong growth throughout Asia, but particularly in Hong Kong, is our experience, too. In many ways, global and local political instabilities, as well as the pandemic, have acted as something of a supercharger for business in the region, catapulting business enquiries around areas such as pre-immigration planning, succession planning, trusts and other asset protection structures to manage wealth for future generations.
Ironically, it is when people feel threatened that they are more likely to look to establish or review their existing succession plans.
For businesses, that creates a chance to bring together corporate, fund and private wealth services to service the growing number of very wealthy Chinese billionaire entrepreneurs and their family offices.
China is the engine room for this growth. The country continues to grow and to be a success story. The Hurun China Rich List, widely recognised as the foremost authority on tracking the rapid changes among China’s high-net-worth population, recorded more wealth created in 2020 than the previous five years combined.
This signals that the structure of the economy has evolved, moving away from traditional sectors such as manufacturing and real estate towards the new economy.
The report’s findings are echoed by UBS and PwC’s 2020 Billionaire Insights Report, which shows that despite the pandemic, the total number of Chinese billionaires increased to a new record of 415 – with a total wealth of $1,680.9bn – at the end of July 2020.
A consequential pattern that has emerged over the past 18 months is an increase in demand for family office services from successful Asian family entrepreneurs.
Asian markets offer enormous prospects for growth. Asian businessmen and businesswomen have very specific needs and increasingly prefer a global wealth management solution.
Typical clients are likely to be multi-banked and seek an open architecture platform, which will enable them to select specific expert advisers, according to their exact requirements.
They also need a level of cultural understanding and linguistic competence to deliver global best practices.
All this means a successful, sophisticated financial services operation in Hong Kong must have functional specialists who are native speakers and, more importantly, can adapt to the pace and way things are now done.
A new generation of confident, successful Chinese, Hong Kong and South East Asian entrepreneurs are setting the bar ever higher.
Personal income taxes in China can rise to 45% and, as clients invest globally in all classes of assets, tax planning expertise is always critically important.
However, other factors also come into play. The ultra-high-net-worth individuals and their families that we work with often have global business interests or family members in different jurisdictions. For them, family governance, wealth protection, succession planning and access to global jurisdictions are central to any discussion too.
When it comes to serving the needs of successful Chinese families, our business partners look to Hong Kong or Singapore in order to provide the necessary expertise to deliver appropriate offshore trust and family office solutions.
The growing trend in the demand for family trusts and family office solutions will last for some time to come. Hong Kong continues to be a gateway for the world into China, but equally, the gateway for mainland Chinese to access global opportunities and solutions in the wealth management industry.
• This article was first published in the Asia Edition of Businesslife in December 2020