Entering the hall, there is a set of Chinese-style rosewood chairs. Around a classic wood screen, a comfortable waiting area awaits, complete with white sofas, traditional Chinese landscape paintings and a gramophone in the corner.

Welcome to Bank of China's two-month old private banking branch in Beijing, the first of its kind in the country.

The private banking service is targeting high-net-worth individuals who require personal wealth management services. The bank, which is 4.4 percent owned by Royal Bank of Scotland, will cater only to individuals with over $1 million to invest. 

"Business has been going well," says Wang Lei, general manage of BOC's private banking sector.

According to Wang, on the opening day, the outlet received some 20 clients.

"Private banking has huge room to grow as the country's rapid economic growth creates an increasing amount of rich customers who are starting to think about financial asset management," he says.

In a recent Barclays Capital survey of 73 wealth managers around the world, over 80 percent forecast at least 16 percent annual growth in assets under management in China.

A report by Boston Consulting Group said nearly 300,000 households in China hold net investment assets worth more than $1 million.

China is one of the fastest-growing wealth management markets. Assets under management are expected to double by 2010.

Li Lihui, president of BOC, is confident about the business potential. "We expect to develop 10,000 clients in one year, with an ideal target of 50,000 in the initial stage," Li said.

The bank expects the private banking business to drive growth of its intermediary services and retail business, and it hopes it will become a new profit source in one to two years.

Other Chinese banks are going to follow suit.

Tang Zhihong, vice-president of China Merchants Bank, announced at a meeting with clients that it will launch private banking services later this year to meet the demands of its high-end customers.

The service will open to clients with 5 million yuan of assets to invest.

China CITIC Bank, which recently listed in Shanghai and Hong Kong, also plans to open private banking services in the latter half of 2007, with an entrance requirement of $1 million.

Foreign banks are also eyeing China, one of the largest untapped markets for private banking in Asia.

Standard Chartered announced on May 28 that it will launch private banking in Shanghai and Beijing in June, followed by Hong Kong, Singapore, Seoul and London.

The Netherlands-based ING is also considering launching private banking services, either in cooperation with its local partner, Bank of Beijing, or by itself after it's registered as a local entity.

Although China just opened renminbi business to foreign-invested banks recently, many of foreign financial giants, including AIG and Deustche Bank, have opened private banking offices in the last two years as an investment for the future.

"There's a 2:8 principle in banking sector. That means 20 percent of high-end customers bring about 80 percent of the bank's revenue. It's the major reason that private banking will become a main focus of competition among Chinese and foreign banks," said Li Yongsen, a professor at Renmin University of China.

In Europe, the average profit margin is as high as 30 percent for private banking businesses, said Guo Tianyong, a banking expert at Central University of Finance and Economics.

According to Guo, foreign banks have more experience in private banking, while Chinese banks have the advantage of well-established client bases.

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