Rich and elite Chinese are
increasingly relocating abroad, taking significant portions of
their financial assets with them. This movement of high net worth
individuals could prove to be a major opportunity for private banks
to cultivate clients from Mainland China.
Go deeper with GlobalData
Taking advantage of new freedoms, increasing numbers of
wealthy Chinese are moving their residence, and their assets,
abroad. The scale of the exodus was spelled out at the PBI Greater
China conference, held in Hong Kong on 11 May.
New research from Bain & Co
(see ‘2020 vision: developed markets on top’)
found 60% of China’s high net worth individuals (HNWIs) surveyed by
the consultancy will emigrate or are planning to apply for
emigration.
Bain’s report also showed that the
trend to seek to emigrate is highest among China’s wealthiest: 27%
of entrepreneurs with a net worth of $15m or more have completed
the formalities required to immigrate through 
investment schemes in countries like the US or cities like
Hong Kong.
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By GlobalDataChinese HNWIs moves
impacting industry
Conference delegates heard that the
movement of Chinese abroad is already impacting on the wealth
industry, providing new opportunities to handle the complex
financial and investment needs of mainland wealthy who are looking
to relocate.
The wealth industry itself is
already adapting to these outflows, with firms shifting bankers
from the mainland back to centres like Hong Kong and Singapore as
they rebalance to attract this offshore business.
“Onshore People’s Republic of China
[PRC] bankers are moving to offshore in Hong Kong or Singapore,”
said Nick Lambe, managing director of recruiters Morgan McKinley
Hong Kong.
“The majority of the [Mainland
China] ultra HNW business is handled offshore in Hong Kong or
Singapore.”
Offshore moves threaten
maturing market
The shift of Chinese abroad is
already having some impact on the fledging domestic Chinese wealth
management industry, say bankers.
This haemorrhage of advisory talent
could, at worst, leave the bulk of the wealth management business
skewed on the mainland towards upmarket retail and priority
banking.
This could potentially hamper the
development of a sound and sophisticated onshore private banking
industry in China.
Still, bankers stress the actual
shift of money out of China is not yet huge, not least because
investors, used to the high returns from real estate and stocks in
the PRC, can not yet find the type of yield they are used to at
home. So a brain drain of the elite is not so far being matched by
a major capital drain.
The shift abroad is still seen as
the most significant movement of Chinese wealth since the handover
of Hong Kong by Britain to China in 1997.
Statistics on the scale of the
foreign exodus so far are sparse. One clue has come from a report
by the Overseas Chinese Affairs Office under the State Council,
which estimated the number of Chinese nationals living abroad
exceeded 45m last year, excluding residents in Hong Kong and Macao.
The figure includes the substantial number of Chinese students who
go abroad to study.
Lifestyles drive Chinese
offshore shift
Bankers believe that there are a
number of factors behind the desire of Chinese to move abroad, to
favoured countries like Canada, Australia, the UK and US.
Not least is China’s increasing
open economy and society. China’s wealthy also see opportunities
abroad for business as well as lifestyle decisions like education
of their children in Western schools, bankers say.
A number of countries also maintain
an open-door policy for the significantly wealthy, which is
attractive to Chinese looking for new lives abroad.
In the US, for example, a family
with at least $500,000 qualifies for a residency visa.
Most significant of all is the way
that China is generating wealthy individuals at rapid rates.
Hurun Report puts CHNWI
estimate much higher
The Hurun China Rich List
puts the number of millionaires at 960,000 at the end of 2010. Of
these, 60,000 had net assets exceeding CNY100m ($15.4m).
The Bain study has more modest
projections, forecasting that the number of Chinese HNWIs would
rise to 585,000 individuals this year, nearly twice as many as
2008.
In joint research, Deloitte and
Oxford Economics project that by 2020, China will become the
world’s seventh-richest nation, with $8.24trn held by mainland
millionaire households. That compares with China’s 12th position in
2011, with $1.67trn.
The definition of wealth in
Deloitte’s study included financial assets (stocks, bonds and other
investments) and non-financial assets including primary residence,
durables, business ownership and other assets.
These different studies continue to highlight the ongoing
difficulty of providing accurate Chinese HNWI estimates.
