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Wealth Management for Expats in China

Submitted: August 2013

There is a growing wealth management industry in China, and it is largely possible to find English-speaking wealth management professionals. Although the Chinese financial sector is moving towards greater transparency, opaque financial products are still an issue in China.

Generally speaking, you should look for a wealth manager if you think you need help with financial planning. A financial institution is prone to offer you more sophisticated services as you get wealthier. These services range from traditional lending or investment management to inheritance tax planning or asset protection.

Issues for expatriates

Don’t miss out on your compliance requirements upon departure from your home country.

Financial planning complexity increases dramatically when you become an expatriate, as additional cross-border issues must be taken into account. These include, but are not limited to:

It is essential to check if your wealth manager is qualified enough to deal with your specific cross-border issues. In particular, it is very important to assess your needs in China, as a foreign wealth manager may not have the adequate skills to address them.

You don’t necessarily need a China-based wealth manager, especially if you already have a one with the appropriate qualifications in your home country. However, you might wish to consider Chinese wealth management products if you decide to hold a large amount of renminbi-denominated assets.

In addition, departing from your home country may be subject to some paperwork there (e.g. tax compliance, letting your insurer know that you leave (See Insurance for Expats in China), switching to a non-resident bank account, etc.). A wealth manager in your home country is more likely to be qualified to help you with this.

In all cases, be wary of:

High yield products

Be very careful if you are proposed a high-yield investment product in China, e.g. above 4%. Demand is very high for these products and Chinese financial institutions compete for market shares.

These products can sometimes be quite opaque, i.e. it can be very hard to understand the actual underlying risks. High risk justifies a higher yield, but you may also lose your capital wholly or partly.

You should seek professional advice to avoid disappointment, and feel free to highlight your concerns regarding product transparency. As a general rule, it is bad to invest in something that you don’t 100% understand.

In fact, high yield structured products pose a significant threat to the stability of the Chinese financial system. This topic is much talked about in the financial press.

US taxpayers

It may be harder for US citizens to find a relevant wealth manager outside the US. This is because US citizens remain subject to US tax rules, even when they are resident outside the US. Consequently, US citizens are unlikely to avail themselves of the potential tax benefits that China offers, and US tax considerations must be taken into account in any international planning.

If you are a US taxpayer, you are likely to need a specialist wealth manager, i.e. with the appropriate qualifications to advise US citizens resident in China.

 

 




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