Many of China’s super-rich plan to leave country

Mark O'Neill December 29, 2022 08:43

Alarmed at the slowing economy, fear of higher taxes on income and profits and the increasing dominance of the state sector, thousands of super-rich Chinese want to leave the country.

A research report by Henley & Partners, an investment migration consultancy, said that about 10,000 high-net-worth individuals wanted to leave China in 2022, taking US$48 billion with them. These are classified as people with assets from US$1 million to US$30 million.

In June, Huang Yimeng, CEO of gaming company XD, announced that he and his family would leave China. “I am preparing my family to move abroad by next year. I am prioritising both my family and the business.” He did not give detailed reasons for his decision. He is based in Shanghai.

With his family, Jack Ma, founder of Alibaba and once China’s richest businessman, has been living quietly in central Tokyo for the last six months. He has stayed out of public view in China for two years.

Several factors are pushing the wealthy out of their homeland. One is the objective of “common prosperity”, a signature policy of President Xi Jinping. The authority said earlier that efforts should be made to expand the middle-income group, increase the incomes of lower-income groups and rationally adjust higher incomes in order to enhance social fairness and justice.

This can only mean one thing for the super-rich – higher taxes on their income, company profits and assets or “voluntary contributions” to projects designated by the state.

This became more likely after data from the Ministry of Finance showed that total fiscal spending by all levels of the government exceeded revenue by 7.75 trillion yuan in the first 11 months of 2022, a deficit more than double the same period of 2021. These were the worst figures for China’s public finances in recent years.

Another factor is fear over the position and status of the private sector in the economy during the Xi era. As a committed Marxist-Leninist, he has repeatedly stressed the dominant role of the Communist Party in all sectors of life in China, including the economy. Private companies have been ordered to set up party branches and committees.

Among the 100 largest publicly traded Chinese companies, the private sector’s share of market value fell from 55.4 per cent in mid-2021 to 42.1 per cent by the end of March 2022.

A third factor was the experience of living through the zero-Covid policy for three years. It showed residents the enormous power of the government to intervene in their lives and restrict their freedoms. It could use this power again.

After the passage of the National Security Law (NSL) in Hong Kong in 2020, Singapore has become increasingly attractive for China’s super-rich. Some fear that, with the NSL, their properties and assets in Hong Kong are no longer out of the reach of mainland regulators and tax collectors.

Private bankers in Singapore report a sharp rise in interest from mainland Chinese. By the end of 2020, there were 400 family offices, double the number of a year earlier. The bankers say the attraction of Singapore is its strong rule of law and independence status. The clients want permanent residence or citizenship in Singapore, they said.

Singapore is more attractive than Canada, Australia and the U.S. because Mandarin is widely spoken there, parents can have their children educated in Mandarin and there is no prejudice against Asians. The government has excellent relations with Beijing.

Taking your assets out of China is not easy. Chinese citizens and companies can remit freely up to a certain amount. Above that, they need written approval from the State Administration of Foreign Exchange. Those who conduct business abroad are better placed, since they have income in foreign exchange they can keep overseas.

But one thing that has become easier is to leave China. After three years of restrictions during the zero-Covid policy, Beijing has announced a reopening of its borders.

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Mark O'Neill

A Hong Kong-based writer, teacher and speaker.