60% of Wealthy Chinese Consider Leaving for Other Countries

Would that it were so easy.

The survey reporting that wealthy Chinese want to leave - and might do so -assumes a couple of key points that may be debatable. First, that they would even be allowed to leave. Second, and perhaps more critical given the kind of people we are talking about, is that they would be allowed to leave with their wealth intact. The guess here: aint happenin.'

But it's a nice thought and interesting, if this survey is truly representative, that sentiment has swung so far away from 'the future is east' meme that has dominated global assumptions for the past few years. You will recall that Chinese PhDs and entrepreneurs were reported to be flocking back to their ancestral homeland because the opportunities to succeed were so plentiful. Labor was relatively cheap, work rules unenforced and the government encouraged innovation (or did not interfere too much with the copying of western innovation). Wealth accumulation was no longer frowned upon.

So, what's changed? Welcome to the global economy. It stands to reason that if your economic policies have enriched your country but impoverished your primary customers, those customers will eventually purchase less and -what a surprise! - that will have an impact on your economy as well. In a democracy that causes bitter debate about who's responsible and what can be done to change it. The US and Europe for all their political entropy and social malaise have invested centuries in intangibles that support the society which makes them such attractive destinations for the rest of the world: a body of enforceable laws, civil liberties, workplace rights, environmental protections, economic opportunity. In China, those safeguards are not yet in place.

In fact, many of the structures that some western politicians and their backers are attempting to tear down in the name of austerity are precisely those which wealthy Chinese cite when they talk about why they might leave China.

The grass is always greener on the other side of the hill. But as European and American leaders attempt to entice Chinese investors to bail them out and the Chinese consider what's in it for them, it may be worth remembering the underpinnings that created and sustained the real western wealth of nations. JL

Jeremy Page reports in the Wall Street Journal:

More than half of China's millionaires are either considering emigrating or have already taken steps to do so, according to a survey that builds on similar findings earlier this year, highlighting worries among the business elite about their quality of life and financial prospects, despite the country's fast-paced growth.

The U.S. is the most popular emigration destination, according to the survey of 980 Chinese people with assets of more than 10 million yuan ($1.6 million)
published on Saturday by Bank of China and wealth researcher Hurun Report.

While growth has slowed, China's economic performance is still the envy of the Western world: It registered annual gross domestic product growth of 9.1% in the third quarter, and the International Monetary Fund has forecast growth of 9.5% for all of 2011.

Concerns are mounting, however, that China's growth could be derailed by a raft of problems, including high inflation, a bubbly real-estate sector and a sharp slowdown in external demand.

Many Chinese who have profited most from the country's growth also express increasing concerns in private about social issues such as China's one-child policy, food safety, pollution, corruption, poor schooling, and a weak legal system.

Rupert Hoogewerf, the founder and publisher of Hurun Report, said the most common reason cited by respondents who were emigrating was their children's education, followed by a desire for better medical treatment, and the fear of pollution in China.

Thousands of rich Shanghai residents have turned China's most cosmopolitan city into the luxury capital of a country that is expected to become the world's largest market for the sector between 2012 and 2015.
."There's also an element of insurance being taken out here," he said, citing concerns about the economic and political environment.

He cautioned, though, that it was unclear if the survey results signaled capital flight as many high-net-worth individuals who were emigrating also said they were keeping much of their money invested in China.

China maintains capital controls that make it hard for rich Chinese to move their money out of the country, but there are substantial loopholes in the system.

Some economists say they have detected signs of large capital outflows in recent months, likely driven by a decline in global risk appetite and expectations of slower yuan appreciation.

A research report from Bank of America Merrill Lynch's strategy team in Hong Kong last month cited "hot-money outflows" as one of four systemic risks that could lead to a hard landing for China's economy. It said that a sign of such outflows were record gambling revenue in the gambling enclave of Macau, a former Portuguese colony near Hong Kong, where many mainland Chinese go to gamble.

In another indication of the jittery mood among China's rich, several Western embassies have also noted a marked increase this year in the number of applications for investment visas, a category that allows people to immigrate if they invest a certain amount of money, according to diplomats.

There is evidence, too, of an uptick in the number of Chinese people buying high-end properties in major Western cities, especially London, Sydney and New York, according to property analysts.

Another survey published in April by China Merchants Bank and Bain & Co. showed that almost 60% of high-net-worth individuals in China had either arranged for, or were considering emigration. Of those, more than 20% had already completed their immigration applications, or made the decision to apply, according to that survey, which covered 2,600 high-net-worth individuals.

China Merchants Bank and Bain estimated that in 2010 there were 500,000 people in China with "individual investable" assets valued at 10 million yuan and 20,000 people with 100 million yuan or more.

Bank of China and Hurun estimated there were 960,000 people with "personal assets" of at least 10 million yuan, and 60,000 people with 100 million yuan or more.

Their survey, conducted in May to September, covered 18 major cities including Beijing, Shanghai, Wuhan, Nanjing, Dalian and Suzhou, and interviewed respondents with an average age of 42 and average personal assets of 60 million yuan.

The survey showed that 46% of respondents were considering emigrating, while an additional 14% had either already emigrated or filed immigration applications.

Mr. Hoogewerf said respondents with assets of 100 million or more were even more inclined to emigrate, with 55% considering leaving China, and 21% already living overseas or having filed applications.

The top destination among those emigrating was the U.S., accounting for 40%, followed by Canada with 37%, Singapore with 14% and Europe with 11%, the survey showed.

One-third of respondents said they had assets overseas, and an additional 28% said they planned to invest abroad in the next three years. Half of those with overseas assets listed their children's education as the reason, while 32% cited emigration.

The U.S. was the most popular destination for their investments, accounting for 42%, and property was the most popular type of investment, accounting for 51%, according to the survey