Why China’s wealthy elite are losing faith in their country’s future: William Stanton | Taiwan News…


While the world too often underestimates or overlooks Taiwan’s achievements, it also often underestimates China’s challenges, exaggerates its strengths, and forgets its weaknesses. Given the extraordinary economic and military growth of the People’s Republic of China (PRC) over the last 30 years — an achievement that the West enabled and abetted — many observers at least implicitly assume that continuing PRC economic and military superiority are inevitable and will never falter.

Such observers also tend to argue, given their assumptions that China is an unstoppable rising power and the United States is an inevitably declining power, that the burden is at least implicitly on the United States to accommodate China to ensure it remains peaceful, including — if necessary — by abandoning Taiwan and ceding, for starters, East Asia and the South China Sea to PRC suzerainty. Examples include Martin Jacques, When China Rules the World: The End of the Western World and the Birth of a New Global Order (2009); Hugh White, The China Choice: Why America Should Share Power (2013); Kevin Rudd, The Future of U.S.-China Relations Under Xi Jinping: Toward a Framework of Constructive Realism for a Common Purpose (2015); and Graham Allison, Destined for War: Can America and China Escape Thucydides’ Trap? (2017).

The Wealth of China’s Leaders Sensitive and Instructive

Nonetheless, the behavior of many of the wealthiest PRC citizens suggests an underlying lack of confidence in their own country. China’s wealthiest are an important indicator of China’s future because becoming a millionaire or a billionaire within a system established and run by the Chinese Communist Party (CCP) almost certainly means you are either a CCP member or have strong CCP connections.

Wealth is a sensitive matter for the CCP leadership as evidenced most recently by the expulsion on August 30 of the Wall Street Journal journalist who had reported allegations that a cousin of Xi Jinping has been involved in high-stakes gambling and possible money laundering in Australia. Similarly, in 2012, following a New York Times report on the hidden wealth of then-Premier Wen Jiabao’s family businesses and a Bloomberg investigation of Xi Jinping’s family’s hidden wealth, the PRC government refused to accredit journalists working for The Times and delayed approving new visas for Bloomberg journalists.

Indicators of a Lack of Confidence Among the PRC’s Wealthy

In recent years, there have been significant indications of shaky confidence among China’s wealthy elites. At the very least, they are hedging their bets about China’s future and their own security and that of their families. When and if they can, wealthy Chinese as well as many members of the rising middle class: either emigrate or have “golden parachute” plans to do so; often acquire residence status in other countries, most frequently Western democracies, often through the purchase of investor visas; send their children abroad to study, mostly in English-speaking Western democracies; buy homes in these countries; and, to the extent possible, move their money overseas where it can be hidden, although Beijing has made this increasingly difficult.

PRC Emigration Directed to the West

In a March 6, 2015 commentary on “The Coming Chinese Crack Up” in the Wall Street Journal, China expert David Shambaugh first called attention to the fact that in 2014, Shanghai’s Hurun Research Institute, which studies China’s wealthy, found that 64 percent of the ‘high net worth individuals’ (HNWIs) whom it polled — 393 millionaires and billionaires — were either emigrating or planning to do so.” In Hurun’s 2017 survey, the Institute reported that 50 percent of China’s HNWIs — survey respondents with a net worth of more than US$1.5 million — were either emigrating or planning to do so.

In the most recent Hurun survey in 2018, some 37 percent of Chinese HNWIs were considering migrating, a drop compared to the previous years, but 12 percent of those polled had already emigrated or were applying to do so. At the same time, it reported that 90 percent of those considering immigration said that they would live in China after retirement or maintain residences both in China and overseas. This is, however, another strong indication that wealthy Chinese are hedging their bets. Many Chinese immigrants, in fact, return to China once their spouses and children are safely installed in homes they have purchased in their target countries.

Nonetheless, tens of thousands of millionaires have left China during the last decade, and an estimated 10,000 quit the country in 2017 alone. The AfrAsia Bank’s Global Wealth Migration Review (GWMR), published in April 2019, reported that the net outflow of migrant Chinese HNWIs in 2018 reached 15,000, higher than any other country in the world. (Russia was in 2nd place with 7,000, and India was in 3rd place with 5,000.) The top destinations in 2018, according to the GWMR, were Australia, the United States, and Canada. Despite the departure of migrants, China still remained one of the top three countries in the world with the most HNWIs, home to an estimated 877,700 millionaires and billionaires in 2017, according to Hurun, which also reported that only the United States and Japan surpassed these numbers.

Better education, cleaner air, better investment opportunities, favorable immigration policies, ease of property purchases, fewer restrictions on personal freedom, lower taxation levels, and better medical care are among the many factors Chinese considered in choosing destinations. Undoubtedly, another reason is that wealthy Chinese can lead lavish lifestyles out of the sight of the Chinese Communist Party and Chinese media. (See, for example, “Chinese Kids Driving Supercars: Inside the Secret Southern California Meet-Up,” at https://youtu.be/sH8sSKwS_gU.)

Investment Visas a Key Means of Emigration

Investor visas have been a principal way for many Chinese to emigrate. Since 2008, Chinese nationals received at least 68 percent of all approved residence permits worldwide based on investment (the so-called “golden visas”), according to Investment Migration Insider on February 25, 2018. The principal destinations included the U.S., Quebec, Australia, New Zealand, the United Kingdom, Portugal, and Spain.

Wealthy Chinese Students Go Abroad, Mostly to Western Democracies

In the 2017-18 academic year, the 363,341 Chinese students studying in the United States represented 33.2 percent of all foreign students in the U.S., more than from any other country. In fact, China has ranked as the leading source of foreign students in the United States since at least 2012-13, according to the 2018 Open Doors report of the Institute of International Education, which is funded in part by the U.S. Government. (Other top-ranking sending countries were: 2. India: 196,271, 17.9 percent; 3. South Korea: 54,555, 5.0 percent; 4. Saudi Arabia: 44,432, 4.1 percent; 5. Canada: 25,909, 2.4 percent; 6. Vietnam: 24,325, 2.2 percent; 7. Taiwan: 22,454, 2.1 percent; and 8. Japan: 18,753, 1.7 percent.)

The number of Chinese students studying in all foreign countries reached 662,100 in 2018, up 8.83 percent from a year earlier, according to the PRC Ministry of Education. The Ministry also reported that 90 percent of these students were self-funded, a clear indication of family wealth. In addition to studying in the United States, most other Chinese students attended schools in Canada, Australia, the UK, and New Zealand, accounting for over 30 percent of foreign students in these countries.

Rich Chinese Also the Biggest Buyers of Foreign Real Estate

Chinese purchases of U.S. residential property hit a record high of US$ 31.7 billion in 2016, according to the U.S. National Association of Realtors (NAR). Between April 2016 and March 2017, China maintained its top position in terms of dollar sales for the fourth straight year, and Chinese remained the top foreign buyers of U.S. real estate. NAR found that among Chinese buyers, 65% paid cash, while 26% used a U.S. mortgage. (South China Morning Post, 20/7/2017).

Even Chinese leaders bought homes overseas. Bo Xilai, the former Communist Party chief in Chongqing, who is now serving a life sentence, was one of these. His former villa on a hillside overlooking Cannes and the Mediterranean was on the market for $US 8.51 million, according to the International Business Times on Dec. 22, 2014. The 400 square-meter mansion boasted five bedrooms, indoor and outdoor swimming pools, two garages, and a 4,000 square-meter garden.

Illicit Overseas Transfers of Cash

Such real estate purchases require transferring cash overseas in quantities far larger than the Chinese foreign exchange rules allow. The maximum amount of Chinese yuan individuals may convert into other currencies is capped at US$50,000 each year. Various money laundering techniques, however, can sometimes work around the restrictions. Thus, It was not surprising that the December 2015 Global Financial Integrity Report covering the years 2004 to 2013 concluded that “China led the world over the 10-year period with US$1.39 trillion in illicit outflows, followed by Russia, Mexico, India, and Malaysia.”



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