Fri, April 22, 2011
Business > Economy

China facing rich drain

2011-04-22 02:12:38 GMT2011-04-22 10:12:38(Beijing Time)  Global Times

Nearly 60 percent of high net worth Chinese are either considering emigration through investment overseas or are already finalizing the process. (file photo)

More and more Chinese millionaires are investing overseas, and many are doing so in order to immigrate to another country, a new report showed Wednesday.

The 2011 Private Wealth Report, published by China Merchants Bank and business consulting firm Bain & Company, showed that the number of high net worth individuals (HNWIs) in China exceeded 500,000 in 2010, 19 percent more than in 2009.

According to the study, those who have at least 10 million yuan ($1.53 million) worth of individual assets (financial assets, not including their primary residence) available for investment are defined as HNWIs.

Among that group, nearly 60 percent are either considering emigration through investment overseas or are already finalizing the process.

Among those with at least 100 million yuan in individual investment assets, 27 percent have already emigrated, and 47 percent are considering leaving China.

The report concluded that "investment immigration" is becoming a trend on the mainland, highlighted by a 73 percent compound annual growth rate of those whose investments helped them immigrate to the US in the past five years.

The result is in line with statistics from another agency. According to the Beijing Entry & Exit Service Association, more than 1,000 people applied for investment immigration to the US in 2009, doubling the figure from 2008.

The report was based on a survey of 2,600 HNWIs, studies with more than 100 analysts and some third-party data.

There are three major reasons behind rich people's immigration: a better education for children, safety of personal wealth and a preparation for retirement, the report showed.

Zhong Dajun, director of the Beijing Dajun Institute for Economic Observation, told the Global Times that the wave of investment immigration of rich people is a wealth drain that has to be stopped.

"We have been working hard to develop the economy in the past 30 years, but now these elite members of society are fleeing with the majority of the wealth. The loss may be even higher than all the foreign investment we have attracted. It is as if, when the time of harvest comes, we find the fruits have all gone to others' baskets," Zhong said.

A report by the China Youth Daily pointed out that, taking into account education and pensions, feelings of insecurity are the major factor prodding rich people to emigrate.

Despite their huge wealth, many of them rely heavily on connections with authorities, but an administrative monopoly in China often puts them in a disadvantageous position in the market. Meanwhile, their connections with authorities make them easy victims of corruption charges and become targets of the public, the newspaper said.

A luxury jewelry trader from Zhejiang Province, who is now doing business in Hong Kong, told the Global Times on condition of anonymity that he also worries about economic bubbles on the mainland amid reports of inflation and drops in housing prices.

According to the 2011 Private Wealth Report, HNWIs have invested 13.7 percent of their total funds in the real estate market this year, a 3.9 percent drop from 2009, after the government tightened control over the property market and repeatedly promised to contain home prices.

Xia Xueluan, an expert on civil administration and a sociologist at Peking University, said, "We can only hope the rich people stay out of patriotism."

"The government has started to improve the wealth-distribution system in the face of the income disparity, but the process will take some time," Xia told the Global Times, adding that the yawning gap between the rich and poor has also fueled anti-rich sentiment in society, thus making billionaires feel even more unsafe.

"Those rich people should ask themselves before they leave, 'Should I desert the motherland and people by putting money into others' hands?'" Xia added Thursday.

The China Youth Daily offered some solutions to stop the rich emigration, including supporting their philanthropic activity, and allowing them to fairly compete in industries that are usually affected by the administrative monopoly, such as education.

Meanwhile, Western countries are eying the rapidly growing number of China's rich people.

A new property development in Seattle's Federal Way neighborhood was recently opened to the public, and it was specially designed for investing immigrants, local media reports said.

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