It would be easier to believe the hype about China's rise to being the world's number one economy if fewer of its wealthy people weren't so keen to get out.
While the trend of wealthy persons moving abroad to flee taxes and outright oppression (often being the same thing) is hardly new, sometimes data that emerges is so striking that it makes one doubt certain widely-held views about a country.
Take the case of China, or, to be exact, mainland China. Type “China to overtake US economy” into Google and it yields 513,000 hits. The International Monetary Fund already says this leapfrogging act has been achieved, although like all such claims, much depends on how much trust one has in official statistics. Whatever the true story is, there is no doubt that the Asian giant is a major world economy and as a result is driving growth in the ranks of the world’s ultra high net worth and high net worth persons. One such person, Jack Ma, whose $26 billion Alibaba IPO in New York last year made headlines, is an example of such riches. Separately, there is an almost daily diet of stories on how China is forging new international trading and economic links, such as free trade pacts with Australia, the Hong Kong-Shanghai stock market hookup, wider investment quotas for foreign investors, and so forth.
But something rather incongruous is going on. China, unlike many Western nations, is booming – albeit at a slower pace than in recent times - but many of its wealthiest people want to get out. According to last year’s report on wealth trends by Shanghai’s Hurun Research Institute, some 64 per cent of high net worth individuals whom it surveyed (393 HNW and UNHW individuals) were either emigrating or wanted to do so. Many of them are sending their children abroad to places such as the UK and US.
Whenever I speak to lawyers in the West that focus on immigration issues for wealthy individuals, China crops up. Pick any example: the Isle of Man government says Chinese businessmen and women are among those interested in setting up there. Lawyers in London say Chinese are among the most enthusiastic seekers of the UK’s visas for investors and entrepreneurs, overtaking Russians in their enthusiasm. The number of investor visas granted to Chinese nationals seeking to enter the UK has skyrocketed to 357 in the year to 30 September compared with 178 in the previous 12-month period, while the number of Russian people using this route has also surged. The UK government is slated to raise the minimum investment sum for a Tier 1 Visa, as they are called, to £2 million from £1 million ($1.516 million). The figures on Chinese would-be wealthy immigrants, from law firm Pinsent Masons, show that Chinese nationals now account for 43 per cent of all investor visas issued by the UK in the last 12 months, the largest share of any country and up by 10 percentage points from five years before. Further south, the Mediterranean island of Malta’s high net worth residency regime has been crafted with countries such as China in mind. Chinese wealthy emigrants have been notable for moving to nations such as Canada and Australia. (In Canada’s case, the western city of Vancouver is notable for its large Asian population.)
According to a report in the Wall Street Journal last week, the desire for Chinese persons to acquire foreign nationality has led to abuses. Federal US agents have searched several Southern California locations that US authorities allege are linked to “multimillion-dollar birth-tourism businesses that enabled thousands of Chinese women to travel here and return home with infants born as US citizens.” Meanwhile, Beijing is said to be trying to extradite back to China a large number of alleged financial fugitives living abroad.
To some extent, a desire by many wealthy people to emigrate may be simply a result of a desire to turn wealth into freedom – freedom to travel and try a different lifestyle. There is nothing very portentous about that. For all the much-vaunted riches of modern China, this is still, let’s not forget, a country that is run by the Communist Party, an entity that is not exactly renowned for its respect for the individual. Some of the would-be emigrants may have had their brushes with that party over alleged corruption or other issues, and the sight of the party cracking down on miscreants may be encouraging some of the business elite to fear they could attract the evil eye. Sometimes anti-corruption drives can be a mask for more ruthless moves by a regime to hold onto power and deal with enemies, real or imagined. Perhaps more worryingly from a sustainability point of view, some wealthy persons may be looking to get out because they fear China’s economic prowess is not all it is cracked up to be and that a downturn could be nasty, and particularly so for anyone seen to have done rather too well out of the boom times. One reads reports of strains in the banking system, of the so-called “shadow banking” arena, of malinvestment (“bridges to nowhere”) and so forth. A country as heavily state-controlled as China is one where the government that has the power to do so much has the power to take a lot away.
Previous outflows of wealthy people and entrepreneurial-minded citizens have often been tales of how a country drove its most enterprising people away, to the benefit of their future homelands. Right now the UK, for example, is seeing a large number of persons from Greece interested in moving to Britain, so lawyers say; Brits have in the past (the 1970s) moved to Switzerland and the US for tax purposes. Lots of French wealthy people have overcome their understandable fears of the UK climate to live in Britain. Although circumstances can be very different, such departures are seldom events that reflect well on the nation of origin. Lots of Chinese, it seems, aren’t so keen on the country in which they made their millions that they want to stay any longer than they have to.