Foreign banks retooling products for Chinese rich

Moreover, foreign banks have fewer client resources, compared with Chinese players who have been operating in the market for dozens of years, with State-owned backgrounds and widespread branches.

In September, three Chinese banks - Industrial and Commercial Bank of China Ltd, China Merchants Bank Co Ltd and Industrial Bank Co Ltd- reported profits from the private banking sector.

China Minsheng Bank Corp said in its semi-annual report that personal banking clients had increased to 12,300 by this June. Assets under management grew to 172.8 billion yuan, up 35 percent from the end of 2012.

A way out

But the foreign players seem undaunted. Banks including UBS AG, Citibank and Standard Chartered Plc said they have no intention of leaving China.

On the contrary, many are reshaping their market strategy, with a revaluation of their own advantages.

"For foreign banks, the way out is to focus on premium clients and offshore business," according to Leung.

"Our target clients are high-net-worth individuals with assets above $2 million and ultra HNWIs (with assets above $50 million). And the latter are more important to our strategy," said Simon Jin, president of UBS (China) Ltd.

"Wealth management has been the core business of UBS. We have been optimistic about the Chinese market and are actively investing here," he added.

The Swiss banking giant began providing wealth management services to the China market six years ago, mainly through the UBS Securities platform.

With a locally incorporated, wholly foreign-owned bank set up in Beijing in 2012, it was able to increase its onshore business in China and diversify product offerings including structured deposits, QDII products and lending solutions for wealth management clients.

"Our services and strengths are different from other banks," Jin said, stressing that rather than selling wealth management products, UBS is provides "client-centric advice" and integrated services leveraging its investment banking and asset management capabilities.

UBS Wealth Management handles 210 billion Swiss francs ($234 billion) worth of invested assets in the Asia-Pacific region. As for the China market, Jin said it is "still in the initial stages".

"We are at the expansion stage now, and we will grow very fast in the next few years," he said, adding that UBS plans to open more branches in China.

HNWIs in China tend to use private banking services mainly for financial products investment, and consultancy services are less important to them, Citibank said in an e-mail to China Daily.

Some high-net-worth individuals don't even know that more premier private banking exists above VIP personal banking services. It will bring opportunities for Citi to develop more clients in this sector through professional assets management services, the bank said.

Treasury investment, including wine and fine art, which requires strong expertise and experience, is a traditional strength of foreign private banks, Leung said.

Non-monetary investments, such as buying mines in Australia or buying rubber plantations in Southeast Asia, also are better conducted by foreign banks, which are experienced in succession plans, privacy protection and security, as well.