Rich Chinese leaving the country, and why that matters to the economy22 August, 2012, 13:22. Posted by Zarathustra
Rich folks in China simply want to leave the country.
That is not even news, to be perfectly clear. A survey did point out that more than a year ago, and survey after survey is pointing to the same conclusion. And they are going everywhere, sometimes to places that we have not heard of, like Prince Edward Island, not to mention other more popular destinations, like Vancouver, Australia, or… whatever…
One of the main reasons for their desire to leave was more or less about safety and security of their wealth.
BBC asked one rich entrepreneur in China why he sought residency right in Singapore. And it perfectly illustrates the point:
But he admits that for many of his wealthy friends it is a sense of insecurity which is leading them to ponder a life outside China.
"Most of them think I’ve got so much money here but one day maybe the government will change the policies and take it all back," he says.
China’s rigid and opaque political system is perhaps one reason for the wealth-drain, particularly in a year in which there is due to be a changing of the guard at the very top of the Communist Party.
There are certainly lifestyle concerns too. Like Louie Huang the wealthy are often seeking cleaner air and a better education for their children.
Add to that the fears that China’s decade-long economic boom may be losing steam and it is perhaps not surprising that China’s rich are on the run.
In case you are not already familiar with Prof. Victor Shih’s theory about capital flight from China, enough capital outflow from China (US$1 trillion or more) would cause huge liquidity problem in Chinese banking system, and the wealthiest 1% of Chinese households would be enough to cause that shift of capital should they decided to leave the country, move the money away, or whatever. And that shift might be happening already (albeit rather slowly), as manifested in the slow but consistent money outflow away from China since late last year, which, as we said, is already tightening liquidity in the banking system which necessitates multiple rounds of liquidity injection in China.