China’s millionaires eye the exit as economic storm clouds gather
Taiwanese native Jane Meng traveled to Hong Kong five years ago to get herself something special for her birthday.
The 31-year-old wealthy owner of an import-export company was not looking for a watch or a designer handbag.
Instead, she came for critical illness insurance.
Meng, who requested not to be identified by her real name, told Al Jazeera, “I didn’t have faith in the Chinese healthcare system and insurance market being able to provide the care and insurance that I might need later in life.”
“So, I made the decision to open a bank account in Hong Kong and apply for insurance there instead.”
Since then, as Meng’s wealth has grown, she has only expanded her financial dealings outside mainland China.
She recently opened a bank account in Singapore where she has moved a significant portion of her assets, and she currently runs her business in Hong Kong.
“I don’t want to have too much of my money in China, because I feel like in a lot of ways, China is not in a good place right now”, she said.
China’s economy is , facing some of its most challenging circumstances in decades.
Beijing’s goal of roughly 5% growth in 2024 has been questioned because economic activity has slowed significantly below the historical trend. Youth unemployment is elevated, hovering above 17 percent.
Household spending accounts for about 40% of the country’s GDP, and the housing market is still suffering from a long-term decline that has resulted in prices falling by about 8% from their peak.
In addition, extensive crackdowns on a number of industries, ranging from tech to finance to private tutoring, have recently slowed business activity, as has the disappearance of prominent business figures like Bao Fan.
Bao, one of the most well-known investment bankers on China’s tech scene, has not been heard from since February 2023, when his investment China Renaissance announced that he was “cooperating” with an investigation.
No information has been provided about the status of any case or any allegations made against him.
“With all that has happened, I don’t think it is safe to be dependent on the Chinese market”, Meng said.
“The situation is just too unstable”.
Meng has considered relocating once more after moving a large portion of her income out of China.
“I have definitely considered leaving altogether”, she said.
Although I own only one small business, I am aware that many more well-off people with significantly more wealth are considering leaving China as well.
Numerous well-off Chinese people have already made the move.
Last year, China saw 13, 800 high-net-worth individuals leave the country – a 28 percent rise from 2022 and the most of any country, according to a report by investment migration firm Henley &, Partners.
By the end of 2024, the company anticipates a record 15, 200 Chinese millionaires having relocated.
According to a report from Credit Suisse and UBS, the outflow does not constitute a mass exodus because China had 6.2 millionaires as of 2021.
“But if it is the beginning of an accelerating trend, then it can present an economic challenge for China”, Allan Von Mehren, chief analyst and China economist at Danske Bank, told Al Jazeera.
When millionaires depart, they tend to take their wealth with them.
Among China’s foreign investors, such capital flight has already made a mark.
Foreign companies eluded China for the second quarter of this year by pulling in a record $15 billion.
A surge in money outflows would only further harm the already struggling Chinese economy, according to Sara Hsu, an associate professor at the University of Tennessee who studies Chinese fintech and shadow banking.
“So, they should be worried about capital flight”, Hsu told Al Jazeera, referring to the Chinese government.
Von Mehren claims that Chinese authorities are already well aware of the potential problems a mass exodus of wealthy Chinese poses.
He claimed that this is one of the reasons the Chinese government has launched a charm offensive to reassure businesspeople.
After years of crackdowns on the private sector, officials have of late struck a more business-friendly tone.
In January, Chinese Premier Li Qiang declared that the country’s economy was “open to business” and pledged to “take active steps” to address “reasonable concerns of the global business community.”
In November, Qiang , met , with senior executives from some of China’s leading tech firms, raising hopes that the crackdown on the sector was ending.
Von Mehren noted that there has been a deterioration of trust between the government and certain sectors of the Chinese business community as a result of the privatization of the sector.
They might be able to stop the flow of people fleeing China if they can restore trust.
Chinese authorities can use their strict capital controls to stop individuals from transferring their assets outside of the country if words of comfort do nothing to calm investors’ nerves.
Chinese nationals are only allowed to , transfer , the equivalent of $50, 000 out of the country each year.
Banks and other financial institutions also have to , report , all domestic and overseas cash transactions of more than 50, 000 yuan ($7, 000) to the authorities, while cash deposits and withdrawals of a similar amount have to be , registered.
Still, wealthy Chinese have found ways to skirt such controls.
It is not uncommon for wealthy individuals to use family members to move funds, according to Hsu, or to buy , assets , such as gold bars that can be moved abroad.
“But others are turning to underground money handlers”, Hsu said.
A sizable global network of these handlers makes up a range of channels that facilitate the movement of money around the world.
One common method employed by Chinese shadow bankers, known as “smurfing”, involves recruiting people who have not used their annual $50, 000 transfer limit.
Authorities charged a man named Li in a case reported by Chinese state media that managed a network of 102 individuals and helped to move millions of dollars from the country every year.
Chinese authorities announced in December that they had uncovered approximately $11 billion in illegal financial transactions since May and had detected more than 100 submerged money-handling operations since May.
According to Hsu, “Underground money handlers are typically connected to criminal activities and are regarded as illegal finance in China.”
Although using them is very risky, especially during a serious government crackdown, they are still useful and can help evacuate a lot of money.
Singapore is one of the most popular options for those who successfully move their assets abroad.
The city-state’s wealthier residents have recently opened hundreds of wealth management offices and are responsible for the largest number of foreign buyers of luxury homes in 2022.
The influx, as well as a recent money laundry scandal, has led to increased scrutiny of incoming Chinese wealth by the Singaporean authorities.
According to two sources with knowledge of the situation, the Monetary Authority of Singapore earlier this year rejected two family office applications with Chinese-related wealth, according to a report from Nikkei Asia in March.
Still, Singapore , remains , a top destination for China’s departing millionaires along with Canada and the US, according to Henley &, Partners.
There is no denying that Meng would have no idea where she would go if she were to leave China.
“I used to live and study in Singapore, so I would choose to settle there”, she said.
Source: Aljazeera
Leave a Reply