Mainland Chinese investors are mostly reluctant to put their assets in markets outside of China and place majority of their wealth in perceived safe-haven assets.

This is not surprising given the comfort level the Chinese have on the local market and the difficulties of investing globally. However, considering the continuing slowdown in China's economic growth, with predictions that the country will most likely cut its growth target in 2015 to its lowest goal in 11 years, and a potential housing bubble burst -- is having all your eggs in one basket a risk to China's burgeoning middle class?

To understand the impact of Chinese investor habits, we need to look into how China's wealthy are currently structuring their savings portfolios. According to the Study of Emerging Affluent Investors in Urban China by Charles Schwab, conducted in China with more than 700 participants, Chinese investors place nearly half (45%) of their wealth in cash or cash equivalents. Often the saving rate is particularly attractive, which is why savers tend to stick to this type of holding. However, this means that asset value can be eroded over time because of inflation and is also at risk if the bank or financial institution fails.

Our research also shows that Chinese investors are also heavily invested in real estate, with investors having twice as many assets in real estate than they do in liquid, investable assets. The real estate industry has been the most prominent driver of growth in China, with government stimulus packages to drive this growth, so it's not surprising that investors have invested heavily in property. However, shocks to the housing market could dramatically reduce investors' overall portfolio size and the lack of liquidity in the asset class also poses significant risks, so we have to wonder why Chinese investors aren't diversifying their assets and what is stopping them from doing so?

According to the study, Chinese investors aren't diversifying their assets due to a number of factors, with comfort and confidence being the most prominent reasons. Although China enabled investors to access global markets with the launch of its Qualified Domestic Institutional Investor (QDII) program in 2006, the total assets in these funds have shrunk to half what they were in 2007, according to Morningstar.

Investors have not viewed these non-domestic funds with favour after they posted dismal returns during the financial crisis. Added to that the growth of the yuan against the US dollar over the past couple of years, investors are more comfortable investing in stocks and assets that are denominated in their home currency. These types of investments are not only delivering attractive returns with relatively low risk compared to that of overseas QDII funds. Coupled with that is the fact that banks are not pushing the QDII funds.

However, if this trend continues, investors' savings could remain at risk, so we need to understand what the potential drivers are for them to diversify their assets, one of which would potentially be the ability to invest among multi-asset classes and markets. Chinese regulators are already making strides to open up the market and relax rules, evidenced by the QDII programme and pilot schemes set up in Shanghai and Shenzhen, and we expect that this will continue, but it will be a gradual process.

As well as regulatory reforms, more needs to be done to ensure investors are comfortable with investing globally. As issues at home, such as an economic slowdown and falling housing prices continue, investors should increasingly examine the possibility of diversifying their portfolios, although they need to feel confident in their ability to do so. What this creates is an opportunity for companies and the industry to start educating investors on the benefits and ways they can diversify their investment portfolios, so that investors are informed and ready when opportunities become available.

James Sun is managing director of Charles Schwab Hong Kong