The private bank Julius Baer takes a stake in a Chinese wealth manager. In doing so, it follows other Western banks: They all believe in the future in China, despite the current problems.
While industry is turning its back on China, the financial sector is slowly approaching the country.
Bank Julius Baer buys a stake in Chinese wealth manager Grow. This for a low double-digit million dollar amount, as the bank announced on Wednesday. Grow will thus strengthen its sales in the country. On the one hand, Julius Baer wants to offer Grow customers access to selected proprietary financial products. On the other hand, the private bank wants to give its customers around the world a little more access to investments and know-how in the Chinese market.
Grow was only founded in Shanghai in 2021, but by managers who have known the Chinese market for a long time. The financial burden of the stake in Grow remains modest for Julius Baer. The bank is taking a small step towards the onshore market in mainland China; the corresponding license (Qualified Domestic Limited Partnership) remains with Grow. Other asset managers such as Blackrock or KKR have recently received the license themselves.
Question mark regarding Beijing
The small step comes at a time that seems unexpected at first glance: the love of the Swiss economy for China has cooled noticeably in the past 24 months. The Middle Kingdom is struggling with a high level of uncertainty in the real estate sector and an economic slowdown, not least caused by the country’s ironclad zero-Covid policy. Added to this are geopolitical tensions with the West over the future of Taiwan; China has also been criticized for its treatment of the Uyghur minority.
However, the most recent exodus primarily affects industrial companies that already have a strong presence on Chinese soil and also want to diversify their production due to the serious supply chain problems of recent times. Western financial companies, including Swiss banks, are quietly taking the opposite approach.
This path is characterized by ambivalence: you don’t want to make yourself dependent on China, but you still can’t avoid the huge market. Philipp Rickenbacher, CEO of Julius Baer, recently said in an interview with the NZZ that the pandemic has recently made it difficult to recruit staff in Hong Kong and mainland China. China was also a difficult market from an investor’s point of view: “The financial markets are not as free as many thought, the risk profile is changing because of state intervention.” But the country remains important for investors.
The fortunes continue to grow
The figures on global asset development, such as those recently compiled by the Credit Suisse Research Institute, support this view: there is hardly any way around China. In 2021, the country contributed a quarter to the total increase in global wealth; Chinese wealth grew by $11.2 trillion to $85.1 trillion. 2022 is likely to be a weak year, but the financial industry remains optimistic for the long term.
Julius Baer is already one of the largest Swiss wealth management banks in Asia, with offices in Singapore, Hong Kong, Tokyo and India. The bank only operates a small representative office in Shanghai. This presence is a legacy of the growth phase under former CEO Boris Collardi; a legacy that the bank nevertheless preserves and develops.
But the Swiss and American big banks are more advanced in onshore business in China; in some cases they have now been able to take over 100 percent of the joint ventures that they had set up with Chinese partners. Julius Baer remains primarily active in the offshore business.