Most of China’s high net worth individuals have used their wealth to obtain residency rights abroad and are increasingly looking to move their assets overseas to diversify risk, according to a joint report by U.S. consulting firm Bain & Co. and China Merchants Bank.
Mainland China had more than 700,000 high net worth individuals (HNWI) with at least 10 million yuan ($1.6 million) in investable assets at the end of last year, more than double the number in 2008.
Bain and China Merchants Bank, however, think the number will rise further and estimates the ranks of the HNWI will expand another 20 percent by the end of the year.
Sources of wealth for China’s financial elite have shifted repeatedly over the past two decades from industry to real estate and more recently the Internet and many are increasingly looking to move their assets abroad via emigration to diversify risk, said the report.
Jennifer Zeng, the lead author of the report, said the desire for emigration and investment is a defensive measure for China’s rich. “The more they look for risk diversification, the more they look elsewhere.”
Zeng also pointed out that the proportion of wealthy Chinese with overseas investments has doubled to 33 percent since 2011, the last time the survey was completed. Among the ultra high net worth Chinese – those with at least 100 million yuan of investable assets – 51 percent said they had money invested overseas.
Those who already have their money offshore say they intend to add more: Almost 60 percent of respondents with investments abroad say they plan to increase them, the report said. Real estate makes up the bulk of investment and top destinations include the United States, Canada, Hong Kong and Singapore.
But investment immigration continues to be at the top of their agenda, with 56 percent of respondents saying they are considering or have finished immigrating. Another 11 percent said they didn’t want to immigrate but that their child was either considering a move or had finished immigration.
Many wealthy Chinese take advantage of other countries' investment immigration policies, which offer citizenship in return for bank deposits or job creation. The United States, Canada, Cyprus and Australia offer residency programmes in exchange for investment.
Pollution and food safety concerns in China also played a role in emigration considerations, the survey showed.
However, Zeng said the biggest change in the survey was a shift in respondents’ goals: This year, wealthy Chinese said their top priorities in managing their money were improved quality of life, education and wealth preservation. Two years ago, respondents identified wealth creation as their main objective.
"We don't see a great difference between high net worth individuals in China and other countries when it comes to their goals, although the situation here is changing and the shift toward the preservation of wealth might accelerate as the speed at which the wealth was created was faster than in most parts of the world,” said Zeng.