Wealthy Chinese prepare to take capital abroad

Economic uncertainty and worries over policymaking in China have swung dramatically into focus for foreign investors. But they have been on the radar of wealthy Chinese based on the mainland for some time.

According to the China team at FT Confidential, an investment research service at the Financial Times, almost half of high net worth individuals on mainland China have earmarked more than 30 per cent of their assets for overseas investment. Almost 61 per cent of those surveyed said they planned to increase their overseas holdings in the next two years. Significantly, wealthy Chinese are not motivated by chasing higher returns when they park their savings abroad. Most respondents expected a return of a maximum of 5 per cent on their investments.Instead, they are chasing safe havens, such as property and insurance schemes, cited as the top two destinations for cash.

This is driving wealthy Chinese to invest their savings abroad on an unprecedented scale, making China a top exporter of wealth on top of its existing status as number one exporter of manufactured goods.

The US was the preferred destination for 42 per cent of survey respondents seeking a safe place for their cash. Its robust economy, coupled with looser visa restrictions and high quality education is making it a magnet for China’s wealthy class. Next ranked were Hong Kong, Australia, Canada and the UK.

Almost 77 per cent of those surveyed owned at least one overseas home. North America is the biggest draw: half of the top 10 cities in which our respondents had purchased residential properties are either in the US or Canada.

That in many cases is linked to a second factor driving the outbound push by wealthy Chinese: securing a western education for their children, and at the same time acquiring foreign passports.
Many parents are buying apartments in college towns for their children with 38 per cent of respondents citing helping with their offspring’s education as their top motivation for investing overseas.

Long Island, a wealthy region east of New York City, has in recent years seen an influx of Chinese homebuyers seeking to tap the area’s high-quality public schools.

FT Confidential surveyed 77 wealthy investors, including high net worth individuals with more than Rmb6m ($950,000), and so-called mass affluent ones with between Rmb600,000 and Rmb6m to invest. It also spoke to immigration firms, private banks, overseas property brokers and auction houses.

Source: Financial Times