High net worth individuals: China’s new export
By George Chen
The opinions expressed are the author’s own.
From Paris to New York, London to Hong Kong, when you see more Chinese people shopping in high-end retail outlets, you know they are indeed growing rich. What if I tell you that many rich Chinese are actually planning to become non-Chinese in the foreseeable future?
Merchants Bank, China’s No.1 credit card issuer, which is also widely considered the best retail bank in the world’s No.2 economy, has teamed up with consultancy firm Bain & Company for a study of China’s high net worth individuals. In addition to some fancy numbers, I’m amused and surprised by one of the latest findings – about 60 percent of China’s high net worth individuals have emigrated or are seriously thinking of doing so.
Who are they? Most of them are entrepreneurs with at least 100 million yuan (about US15.3 million) to invest, according to the joint survey.
The survey defines Chinese high net worth individuals as those with at least 10 million yuan available to invest, and a fancier class of super high net worth individuals with at least 100 million yuan to invest. In total, there are about 500,000 high net worth individuals with an average of 30 million yuan of capital, the survey said.
As of the end of 2010, the about 500,000 high net worth individuals, including more than 20,000 super high net worth individuals held about 15 trillion yuan available to invest. That figure is expected to grow to 18 trillion yuan this year, according to the survey, which had about 2,600 respondents.
Rich Chinese often prefer to emigrate to countries such as the United States, Canada and Australia. The main reasons behind such plans, mostly via well-known investment immigration schemes, are for their children’s education and a preferable retirement environment. Only 6 percent of respondents considering emigrating cited taxes as a reason for leaving China. Apparently, most high net worth Chinese are not particularly critical of the country’s taxation system.
An influx of wealthy Chinese immigrants has become a hot issue in some countries, especially among conservative lawmakers in the West. For example, Canada doubled its minimum investment migration requirement to C$1.6 million in net assets in 2010.
If the survey is reliable, it may come as a warning to the Chinese government. When rich people leave the country, will they also transfer their wealth to their new homes? Otherwise, what’s the point in getting a foreign passport?
China doesn’t recognize dual-nationality. Once you emigrate, your Chinese passport is invalidated. I wonder if Beijing will adjust nationality rules soon to encourage the rich to stay at home.
George Chen is a Reuters editor and columnist based in Hong Kong.
Photo: People walk past a giant suitcase for Louis Vuitton on display outside a Louis Vuitton store in Shanghai, August 2, 2010 REUTERS/Aly Song