China's footloose rich on the move
BY 2012-12-05 21:00:22
The South Beauty chief Zhang Lan, a businesswoman known for her high-end restaurant chains in China and her celebrity daughter-in-law, recently sparked a heated debate on the emigration of rich Chinese after she was found to possess a foreign passport. Many netizens have lashed out at Zhang for her unpatriotic "betrayal".
In 2010, the world was given another sign of the blistering pace of Chinese economic development. That year, according to the "Hurun Rich List," China boasted the highest number of billionaires in the world.
Yet just a year later, in October of 2011, the Hurun Report had some not so good news for China. A survey conducted by the Hurun Report and the Bank of China showed that 46 percent of the Chinese millionaires - individuals whose net worth exceeded $1.6 million - were considering leaving China. Moreover, this survey and another conducted by China Merchants Bank and the Bain & Company show that the richest Chinese are the most likely to emigrate.
Extremely wealthy Chinese are increasingly taking advantage of the little-known American EB-5 Visa program, which is designed to lure foreign investment to the United States. Under its provisions, foreigners investing $500,000 or more in a business that creates 10 or more jobs can receive a green card. More than 2,900 Chinese applied for the EB-5 visa last year, up from 63 in 2006.
This increase was not driven by the desire of rich Chinese to cash in on lucrative US investment opportunities. The growing interest in investment emigration instead illustrates the old adage among China's rich that "nothing is a problem if money can solve it".
In this instance, by enabling the very wealthy to "invest" their way to US citizenship, the money is a solution to Chinese millionaire and billionaire concerns over quality of life issues in their country.
In the Hurun survey, 60 percent of the respondents said they wished to leave China in search of better educational opportunities for their children. Worries over pollution and food safety were also among the top reasons for emigrating.
Some respondents also cited concerns over corruption. Party and government leaders have acknowledged that this is a problem and are strengthening disciplinary procedures to deal with it. However, the chief political anxiety of the wealthy stems not from any unhappiness with China's government. Instead, it is driven by growing fear of popular resentment against the rich.
Indeed, in a 2012 Pew Research Center Global Attitudes Survey of China, 87 percent of those who responded viewed socio-economic inequality to be at least a moderately big problem. And 45 percent completely agreed and 36 percent mostly agreed with the statement that "Today, it is really true that the rich get richer and the poor get poorer".
These attitudes, especially many netizens' obvious discontent with or even hatred of some rich who like to show off their wealth, are surely fueling worries among rich Chinese about possible wealth redistribution in the country.
Will this exodus of the wealthy harm China's economy? One could argue that China may be hurt by the capital flight accompanying their departure. However, foreign manufacturers and other businesses continue to see China as an attractive place to set up shop. The continued strong inflows of direct foreign investment will certainly dwarf whatever capital China loses from the efforts of wealthy Chinese to "invest" in obtaining US green cards.
But the mass emigration of wealthy Chinese, if it indeed comes to pass, poses another major problem for China's economy. Losing such individuals will certainly deprive China of considerable entrepreneurial talent, which is arguably an essential element in ensuring its continued rapid economic growth.
This impact is unlikely to be offset by any positive gains China could make from emigrants serving as an overseas voice for Chinese businesses seeking to "go out", as Haier did in its recently thwarted effort to purchase Maytag Appliances. Given both their small numbers and limited scale of their investment activity relative to the size of the US economy, rich Chinese migrants will be a weak lobby group. US policy on matters such as acquisition activity by Chinese companies will still be determined by broader shifts in American public opinion.
Thus China's increasingly footloose wealth poses yet another challenge. The Chinese government has made enhancing the quality of life, especially with respect to the environment, healthcare and education, a main priority. And greater investments in education and health could also improve the lives of ordinary people, thereby narrowing the widening socio-economic gap fueling their resentment against the wealthy.
With increasing numbers of rich Chinese already leaving the country or contemplating doing so, getting all of this right will have to be accomplished sooner, not later.