China’s experiment with the creation of ‘millionaire clubs’ is coming to a full circle but it leaves behind a dirty culture that will take decades for new generation of Chinese to clean and establish rule of law which can bring China back to a civilized state.
The Communist Party of China which has been ruling China since 1949 is not in a position to clean the mess as most of its senior leaders are involved in more than 400 scams running into 440 billion dollar involving various sectors.
But the filthy rich millionaires once created by years of CPC ruling due to lack of public scrutiny are now leaving China to secure their own future at the risk of the nation whom they had once adored with high spirit.
Today most of the Chinese millionaires are desperate to leave China as soon as possible and their destination is Europe, America, Australia, Canada and few opt for Gulf states.
In view of global financial crisis, a number of countries are opening the doors to the estimated 1 million Chinese millionaires, yet provided they bring their money with them. It is something of a bidding war in reverse.
Conspicuous wealth makes Chinese businessmen and women a target for the country’s anti-corruption authorities.
A study in 2012 found that Chinese listed on the Shanghai-based Hurun Rich List were more likely to be investigated and more likely to see the market value of their listed companies fall.
And emigration is particularly sensitive, as Beijing has recently pledged to pursue some 150 ‘economic fugitives’ living in the United States.
Attracting investors
The US, for example, will take just $1 million for a green card, offering residence. That is for an investment that generates 10 jobs for at least two years, although under the so-called EB-5 program, investment in a public development project can be a less-risky substitute.
This figure halves if the investment is in a rural area or in an industry suffering from high employment.
In exchange, Chinese investors could get a green card or permanent US residency in less than three years. The program, run by the US government, is called investor immigration.
However, China is the place to find nouveau riche these days, and since being introduced, the programs have all been dominated by potential investors from the Middle Kingdom who want out.
Chinese citizens made up eight of 10 investor visas issued by the US State Department last year. George Osborne, the British chancellor of the exchequer, declared that the UK would focus on making it easier for Chinese investors to enter the country.
Countries around the world are paving the way for these Chinese wealth refugees, offering special programs that issue residence permits in exchange for investment. Australia, the US and the EU are effectively competing to welcome moneyed Chinese.
Crisis-stricken Portugal started a “Golden Visa” program in 2012, under which the purchase of a property worth at least 500,000 euros can get a residence permit.
Last year, 90 percent of applicants were from China and Hong Kong. In September last year, Spain implemented an almost identical program.
Greece and Cyprus already hand out residence permits for the purchase of a property worth 250,000 euros. In Hungary, you can buy residency by investing 250,000 euros in a five-year state fund.
Even the Netherlands has jumped on the bandwagon: an investment of 1.25 million euros in the Dutch economy will entitle you to live in the country.
However, in 2014 the number of applicants for the US immigrant investor program hit an all-time high, and 85 per cent of the applicants were Chinese.
This was the first time the yearly quota maxed out, and the US government temporarily ceased accepting applications.
A similar situation has arisen in Canada. Over the past few years, the number of applicants from China has exploded, and in February 2014 the Canadian government announced that it will be calling a halt to their Immigrant Investor Plan (IIP) launched in 1986.
Now, Canada is going in the opposite direction. It canceled its investment visa earlier this year after the process became overrun by Chinese applicants. It was one of the cheapest routes out of China.
The Canadian government said the program significantly undervalued Canadian permanent residency. It also provoked local resentment, as wealthy immigrants bid up property prices in places like Vancouver.
Under Chinese law, citizens are forbidden to export more than 50,000 US dollars per year, but this seems to make little difference.
Yet, there are more than 21,000 Chinese offshore companies in barely-regulated tax havens in the Caribbean. A lot of the money flows through Hong Kong. The city serves as a bridgehead for money transfers abroad.
Deng Xiaoping had a vision that some people should initially be allowed to become rich while this wealth should be achieved through honest work.
However, many of the mega-rich only achieved their wealth through nepotism, embezzlement of government money, and speculation. Now they want to move their money abroad, where it will be safe.
Many Chinese now feel but realistically that economic opportunities do not top the list for many émigrés. China is not an easy place to live.
Eager to move
Wealthy Chinese parents are becoming increasingly concerned about raising kids in an environment with filthy air, not to mention a critical lack of clean water and constant food and beverage safety scandals.
Calculating prospective parents can also use the visas as a means to obtain foreign nationality for their children, if they are born abroad.
Later, if those children return to China with a foreign passport, they will be able to attend international schools, which are off-limits to Chinese nationals.
It is also easier for them to travel and attend university abroad. Unscrupulous businessmen may be looking to escape China with their wealth intact before the government’s current anti-corruption campaign catches up with them.
Around half of China’s rich aim to move to another country within the next five years, according to a Barclays Wealth report. Specifically, up to 47 per cent of Chinese with more than $1.5 million in total net worth surveyed by the bank would like to move abroad, compared to the global average of 29 per cent, the report said.
However, the report questioned more than 2,000 individuals from 17 countries, all of whom had more than US$1.5 million in total net worth, and 200 with more than US$15 million.
“Around the world, a growing number of high net worth individuals are becoming more international in their outlook and behaviour, and moving more frequently from country to country,” the report said.
Nearly half of those surveyed had already lived or were living in another country, while many more intended to move in the near future.
Respondents from the mainland were the most eager to move, with 47 per cent saying they planned to do just that in the next five years, compared with just 16 per cent of Hongkongers.
Twenty-three per cent of Singaporeans said they planned to relocate within five years, the second highest, followed by 20 per cent of British respondents.
American and Indian millionaires were the most attached to their homelands, with only 6 per cent and 5 per cent, respectively, saying they wanted to leave.
Mobility among the rich has increased worldwide, with 20 per cent of respondents having lived in three or more countries. Entrepreneurs are twice as likely to be planning a move to another country in the next five years.
Reasons to leave included educational and employment opportunities for children overseas (78 per cent), preferable economic climate and greater security (73 per cent), and health care and social services (18 per cent).
“The wealthy have a choice of going anywhere in the world and they go where they can get professional services, and access to everything from property through to arts and entertainment,” said James Faulconbridge, an expert on globalisation and mobility at Lancaster University in England.
Around 30 per cent of Chinese respondents listed Hong Kong as their top destination, followed by Canada at 23 per cent.
Immigration to Canada has become more difficult in recent months after an investor visa scheme used by many rich Chinese was scrapped due to an insurmountable backlog of applications.
A revamped scheme is expected to be launched later this year, but Canadian Citizenship and Immigration Minister Chris Alexander said in March that the required amount needed to qualify would be more than double that of the previous visa’s C$800,000 (HK$5.6 million).
“We want Chinese investors in Canada and the door is open, the pathways are multiple,” Alexander said. “We are making these changes for them.”
Similarly, many young Chinese entrepreneurs are keen that they must look for another country soon as the time is running out for them.
Oliver Hua, who does market research for Western companies in China, attended an O’Hare investor event in Shanghai.
Hua said rich Chinese want green cards so they can protect their wealth as China’s economy inevitably slows.
“Everybody worries. If you have money, you worry,” Hua says. “Because so much assets. Tomorrow, these assets are going down.”
Hua attended the Shanghai event on behalf of his brother, a wealthy real estate developer. Hua said his brother is interested in emigrating so he can transfer assets outside of China more easily.
Challenges
In China’s one-party system, businessmen rely on relationships with the government to prosper. Hua says if things turn sour, there is no protection.
Many wealthy Chinese are anxious because, despite China’s tremendous progress, the country still faces a lot of challenges. Income inequality is staggering, corruption systemic and public protests a daily occurrence.
“Many people have questions about the uncertainty surrounding China’s economy, so they start looking for a second or third option,” says Leo Yang, who manages a company that helps wealthy Chinese get green cards.
Last fiscal year, nearly 3,000 well-to-do Chinese applied for investor green cards in the US. That is up from just 270 four years ago.
A recent survey by Bank of China and Hurun, a company that tracks China’s rich, found that 60 percent of Chinese millionaires have either emigrated, are in the process of doing so or are thinking about it.
A China Merchant’s Bank Report found the top reason was a better education for their children. The second: protecting assets.
“I think last year, all my clients bought a hundred houses in the United States,” Yang says.
Yang said Chinese like US real estate because they can own it in total and can pass homes onto their children.
In China, the government controls the land. People can own houses, but they can only lease the land underneath.
“We buy the house and we can only use it for 70 years,” he said. “In America or some other country, we can get the land forever. My clients always want to buy something forever.”
Yang says most Chinese who apply for investment immigration are legitimate, but he says 5 percent to 10 percent want to move money they got through corruption.
“These people want to put money outside of China. Washing-we call it washing money,” he says. “So I have some clients come to my company and say I have money. I do not have any documents. I say no, this is illegal.”
Andy Zhang is a far more typical candidate for residency. He studies automotive engineering at a technical school in Houston.
Home in Shanghai on break, Zhang, 23, attended the investor event to learn more about a green card. He says a green card could help him advance in the US.
“It can bring me some benefits like education or it could make it easier to get employed,” Zhang says.
He says he loves living in the US and that the lifestyle is quiet and cozy compared with the faster pace of Shanghai. But he is not giving up on his homeland.
He hopes to work in the US for BMW for several years and then probably return to China.
Another person looking for residency in another country is Leo Li, who works in the solar panel business.
In the next several years, Li hopes to save enough money to qualify for investment immigration in Singapore or Canada. One reason: more freedom.
In China, political leaders and the filthy rich often turn out to be the same people. One major new study of social class in China, by sociologist David SG Goodman, traces the origins of many Chinese elite fortunes back to the Party-state.
The rich with these Party-state roots, he notes, include “not only those still working in the state sector but also the majority of those identified as private entrepreneurs.”
In short, China has become a government of the rich, by the rich, and for the rich, a billionaire factory that last year created more new billionaires than any other country on Earth.
China is fast catching up with the United States as the home of the world’s largest number of billionaires.
In fact, China may already have surpassed the United States as a billionaire country of origin, if Chinese billionaires who have left the country are included.
At least one-third of Chinese multi-millionaires now have foreign passports or green cards, nearly two-thirds plan to get them, and 85 to 90 percent send their children overseas for education.
