The Chinese Exodus – Part 1

8.20.2016 | The Chinese Exodus – Part 1 – Tweed Economics

The Chinese Exodus – Part 1

The Wall Street Journal drew attention to the Chinese exodus earlier this week in a long essay on “The Great Chinese Exodus”, a phenomenon, which has also been widely reported elsewhere over the last few years. A recent report by WealthInsight found that the Chinese wealthy have $658 billion overseas.

Chinese nationals are leaving China “in vast waves”. Over 100 million Chinese citizens left the country last year, mostly for tourism; but increasing numbers of students and the wealthy are also leaving, not to return. In a recent survey compiled by Shanghai research firm Hurun Report, it was noted that 64% of China’s wealthy (designated as those with assets of over $1.6 million) are emigrating or intend to do so. Surprising news given the fact that the exodus is occurring as China is becoming a world power.

Today, mainland China has the largest number of billionaires – the Harun Report counted 596 last year compared to 537 in the U.S. Bruno Lannes, partner at Bain & Co management consultancy told the South China Morning Post that this was in general good news for the world as it meant China would continue to help drive the global economy.

Lannes commented, “The world economy today is much more integrated than it was a few years ago,” he said. “When China is doing well, the rest of the world also feels better, because China is importing their products, the middle classes want their products, the billionaires want more holidays, more luxury … All this helps the global economy.”

chinese exodus part 1

What are the factors behind the exodus?

Why are the wealthy Chinese leaving their own country? On the positive side, a comfortable lifestyle along with a strong investment environment can be found outside mainland China for relatively affordable prices in attractive areas such as California or Australia’s Gold Coast, both of which have seen increasing numbers of Chinese immigrants in recent years.

Many of those leaving expressed their perception of a foreign passport as being simply an insurance policy in case things go wrong at home. Ms. Sun, a 34-year-old Beijing resident interviewed by the WSJ said “I’m just giving my family another option”.

Factors causing the exodus from the homeland include the fact that China’s urban population is afflicted by a number of challenging issues, including chronic pollution and an underdeveloped education system that heavily relies on testing. There is also a sense of political uncertainty, which is not widely reported on. However, according to the WSJ, President Xi Jinping’s premiership has “created as much anxiety as hope”.

The Chinese are also splitting their time between their homeland and overseas destinations as they make investments in other countries. The Financial Times released a study last year in which 42% of the wealthy Chinese cited the U.S. as their top destination for their investments. Volatile stock markets and the slowing Chinese economy have led to a surge in interest from the overseas Chinese in U.S. investment opportunities, particularly real estate.

References:

http://www.wsj.com/articles/the-great-chinese-exodus-1408120906

http://www.independent.co.uk/news/world/asia/china-s-millionaire-exodus-as-wealthy-flee-with-america-the-preferred-destination-9069551.html

http://www.ca-soc.org/wpmu284a/documents/

http://www.scmp.com/news/china/money-wealth/article/1884376/number-rich-chinese-grows-23-cent-and-many-want-emigrate

http://www.scmp.com/news/china/economy/article/1877180/whatever-happened-sharing-wealth-chinas-fast-growing-group

http://www.cnbc.com/2015/09/02/amid-turmoil-wealthy-chinese-eyeing-the-us.html