China’s millionaires look to exit as economic storm clouds gather Business and economics

Taipei, Taiwan – Five years ago, Jin Ming traveled from her home in Shanghai to Hong Kong to buy herself something special for her birthday.

The wealthy 31-year-old owner of an import-export company wasn’t looking for a designer watch or handbag.

Instead, she came for critical illness insurance.

“I had no confidence in the ability of the Chinese healthcare system and insurance market to provide the care and insurance I might need later in my life,” Meng, who asked not to be referred to by her real name, told Al Jazeera.

“So, I decided to go and open a bank account in Hong Kong and get insurance there instead.”

Since then, as Meng’s wealth has grown, she has expanded her financial dealings outside mainland China.

Today, it runs a large portion of its business through Hong Kong, and has recently set up a bank account in Singapore to which it has moved many of its assets.

“I don’t want to have a lot of my money in China, because in many ways I feel like China is not in a good place right now,” she said.

The Chinese economy is facing some of the most difficult conditions it has experienced in decades.

Economic activity has slowed below the historical trend, raising doubts that Beijing will meet its target of roughly 5% growth in 2024. Youth unemployment is also high, hovering above 17%.

Household spending, at about 40 percent of GDP, remains well below the global average, and the real estate market remains in the grip of a long recession that has seen prices fall about 8 percent from their peak.

Meanwhile, sweeping crackdowns on a wide range of industries, from technology to finance and tutoring, have caused tension in the business world in recent years, as has the disappearance of prominent businessmen such as Bao Fan.

We haven’t heard from Bao, one of the most high-profile investment bankers in China’s tech scene, since February 2023, when his investment China Renaissance announced it was “cooperating” with the investigation.

The authorities did not provide any details about any allegations against him or the status of any case.

“With everything that’s happened, I don’t think it’s safe Depends on the Chinese market“Meng said.

“The situation is very unstable.”

After moving much of her money out of China, Meng has considered moving elsewhere one day, too.

“I definitely thought about leaving altogether,” she said.

“I’m just a small business owner, but I know that a lot of rich people with a lot of assets are thinking about leaving China as well.”

Many wealthy Chinese have already taken the plunge.

Last year, China saw 13,800 high-net-worth individuals leave the country, an increase of 28% from 2022, the most of any country, according to a report by investment migration firm Henley & Partners.

The company expects a record 15,200 Chinese millionaires to move in by the end of 2024.

The outflow does not constitute an exodus, as China was home to 6.2 millionaires as of 2021, according to a report by Credit Suisse and UBS.

“But if this is the beginning of an accelerating trend, it could represent an economic challenge for China,” Alan von Mehren, chief China analyst and economist at Danske Bank, told Al Jazeera.

When millionaires leave, they tend to take their wealth with them.

This capital flight has left a clear impact among foreign investors in China.

In the second quarter of this year, foreign companies withdrew a record $15 billion from China.

According to Sarah Hsu, an associate professor at the University of Tennessee who studies Chinese fintech and shadow banks, increased money outflows will only do more damage to the already existing Chinese economy. The faltering Chinese economy.

“So, they should be concerned about capital flight,” Hsu told Al Jazeera, referring to the Chinese government.

But Chinese authorities are already well aware of the problems that a mass exodus of wealthy Chinese could pose, according to von Mehren.

“This is partly why we’ve seen the Chinese government launch a charm offensive to try to reassure people in the private sector,” he said.

After years of crackdowns on the private sector, officials have recently taken a more business-friendly tone.

Chinese Premier Li Qiang announced last January that the Chinese economy is in good shape Open for business He pledged to “take effective steps to address the reasonable concerns of the global business community.”

In November, Chiang met with senior executives from some of China’s leading technology companies, raising hopes that the crackdown on the sector would end.

“Since the crackdowns on the private sector, there has been a breakdown in trust between central authorities and sectors of the Chinese business community,” von Meeren said.

“If they can restore trust, they may be able to stem the flow of people seeking away from China.”

If words of reassurance fail to calm investors’ nerves, Chinese authorities could resort to strict capital controls to try to prevent individuals from moving their assets out of the country.

Chinese citizens are only allowed to transfer the equivalent of $50,000 out of the country each year.

Banks and other financial institutions must also report all domestic and overseas cash transactions worth more than 50,000 yuan ($7,000) to the authorities, while cash deposits and withdrawals of a similar value must be recorded.

However, wealthy Chinese have found ways to circumvent such controls.

It is not uncommon for wealthy individuals to use family members to move money, according to Hsu, or to purchase assets such as gold bullion that can be moved abroad.

“But others are turning to underground money,” Hsu said.

These dealers form a vast global network that facilitates the transfer of money around the world through a variety of channels.

One common method used by Chinese shadow bankers, known as “smurfs,” involves recruiting people who have not used the $50,000 annual transfer limit.

In one case reported by Chinese state media, authorities accused a man named Li of single-handedly overseeing a 102-person network that facilitated the transfer of millions of dollars out of the country each year.

In December, Chinese authorities announced that they had dismantled more than 100 secret money-handling operations since May, tracking illicit financial transactions totaling about $11 billion.

“Underground money processors “It is usually linked to criminal activities and is considered illegal financing in China,” Hsu said.

“They are very risky to use, especially during a serious government crackdown, but they are effective and can move large sums of money out of the country.”

For those who successfully move their assets abroad, Singapore is among the most popular options.

Rich Chinese have set up hundreds of wealth management offices in the city-state in recent years and represent the largest group of foreign buyers of luxury homes in 2022.

flow, as well as the latter Money laundering scandalThis has led to increased scrutiny of incoming Chinese wealth by Singaporean authorities.

The Monetary Authority of Singapore earlier this year rejected two applications from high-net-worth family offices affiliated with China, the Nikkei Asia reported in March, citing two sources familiar with the matter.

However, Singapore remains the top destination for China’s outgoing millionaires alongside Canada and the United States, according to Henley & Partners.

If Meng leaves China, there is little doubt in her mind about where she will go.

“I was living and studying in Singapore, so I will choose to settle there,” she said.

“It would be most convenient for me.”