EXECUTIVE SUMMARY Wealth growth is slowing but will still outstrip the West Key findings Critical success factors SIZING AND FORECASTING THE CHINESE WEALTH MARKET 2.8% of China's affluent individuals can be considered HNW Affluent individuals in China account for 3.5% of the total adult population Affluent individuals account for 3.5% of the population but hold 84.1% of liquid assets in China Chinese HNW individuals held $3,565bn in liquid assets in 2015 DRIVERS OF GROWTH IN THE CHINESE WEALTH MARKET China's retail savings and investments have impressed with remarkable growth in recent years China's retail investment market is forecast to perform strongly despite weaker economic conditions As can be expected in emerging markets, deposits dominate China's retail investment market Deposits continue to dominate China's retail investment market, but mutual fund holdings are forecast to grow fastest Retail deposit growth is set to pick up again in 2016, but will be less pronounced than in the past However, deposit rates remain low and face stiff competition from money market funds Despite strong growth rates, China's retail bond market will remain insignificant The subdued performance of the Shanghai Composite Index will limit growth of direct equities Money market funds are growing in popularity, shielding funds from the vagaries of the stock market HNW INVESTMENT PREFERENCES Chinese HNW individuals allocate 35% of their portfolios outside traditional liquid assets Chinese HNW investors allocate an above-average proportion of their wealth into property, but this is about to change Alternatives and commodities have become an integral part of the typical HNW portfolio in China A significant proportion of HNW wealth is invested offshore Despite maintaining a closed capital account, a significant amount is leaving the country every year Better returns overseas and local economic instability prompt Chinese individuals to invest offshore Tax is a comparatively limited driver for offshore investments The US is the single most important booking center for Chinese HNW wealth APPENDIX Abbreviations and acronyms Supplementary data Definitions Affluent Common Reporting Standard (CRS) Domicile Double taxation agreement (DTA) Foreign Account Tax Compliance Act (FATCA) HNW Liquid assets Mass affluent Onshore Residency Tax information exchange agreement (TIEA) Methodology Global Wealth Model methodology Global Retail Investments Analytics methodology Verdict Financial's 2015 Global Wealth Managers Survey Bibliography Further reading About Verdict Financial Disclaimer

Table 1: Progressive tax rates levied in China, 2015 Table 2: China: adult population segmented by affluent category and asset band (000s), 2010?14 Table 3: China: adult population segmented by affluent category and asset band (000s), 2015e?19f Table 4: China: total liquid wealth segmented by affluent category and asset band ($bn), 2010-14 Table 5: China: total liquid wealth segmented by affluent category and asset band ($bn), 2015e-19f Table 6: Chinese yuan-US dollar exchange rate, December 31, 2014 and December 31, 2015 Figure 1: Affluent individuals represented 3.52% of the population in 2015 Figure 2: The affluent population holds 84.1% of retail liquid assets in China Figure 3: While lower than in the past, retail savings and investment growth is forecast to remain strong Figure 4: Deposits account for 81.1% of the Chinese retail and investment market Figure 5: Mutual funds and bonds are forecast to grow at impressive rates Figure 6: Deposit growth is inextricably linked to real GDP growth, but importantly always outperforms it Figure 7: Retail bond holdings are negatively correlated to the Shanghai Composite Index Figure 8: Stock market performance has been weak over the past year Figure 9: There is a strong correlation between stock market performance and equity funds, and to a lesser extent mutual fund holdings Figure 10: China's total fund industry is dominated by money market funds Figure 11: A significant proportion of HNW wealth is allocated to non-traditional investments Figure 12: Chinese HNW individuals hold 27% of their assets offshore Figure 13: Asset diversification and investment options remain the biggest motivations for offshore investment Figure 14: The largest proportion of Chinese HNW offshore wealth is booked in the US Figure 15: The Chinese government has signed several TIEAs over the past few years