When Chinese get rich, they want to leave China
For the first time in modern Chinese history, China’s rich are on the run. It has become the new normal: hundreds of billions of dollars and hundreds of thousands of rich Chinese are leaving China for overseas destinations.
Rich Chinese now constitute one of the largest investment groups in the United States. Thanks to the EB-5 Program, a visa program that provides American green cards to foreigners who invest at least $500,000 in U.S. projects that create jobs, more than 13,000 Chinese families have each invested a minimum of $500,000 into the U.S. economy since 2008. The total EB-5 investment from Mainland Chinese now amounts to $6.7 billion, or more than a half of the overall $13.05 billion of foreign direct investment that has been injected into the U.S. economy in the last decade.
“Each year, America grants green cards to 10,000 rich investors, the vast majority of whom are now Chinese,” reports Alana Semuels of the Atlantic Monthly, “Chinese investors are the vast majority of the people using the program: In 2014, 9,128 of the EB-5 visas were allocated to Chinese nationals, according to State Department statistics. The next biggest number: 225, the number of South Korean nationals who received EB-5 visas? followed by 129 from Mexico and 96 from India.”
“There is one Chinese export product that is seemingly unstoppable at the moment- millionaires. A tidal wave of Chinese money is currently pouring into U.S. infrastructure projects,” says John Sudworth of BBC News, “the EB-5 visa scheme is open to any nationality but Chinese investors now make up 75 percent of the total. The EB-5 data is not the only evidence. A survey last year of 1,000 Chinese millionaires found 60 percent considering moving overseas.”
China’s rich are also looking for other safe haven to invest their money. “American real estate is an increasingly popular destination for Chinese cash,” according to Dionne Searcey and Keith Bradsher of New York Times, “In the U.S., the home-buying spree began on the coasts, where Chinese buyers snapped up luxury condos in Manhattan and McMansions in Silicon Valley, pushing up home values in big cities. It is now spreading to the middle of the country, where prices are more modest.”
In 2015, for the first time, Chinese became the largest group of overseas homebuyers in the United States. According to the study from the Asia Society and Rosen Consulting Group, in the past five years, Chinese home buyers had spent a total of $110 billion on American homes and the figure is set to double in the coming five years.
Homebuyers from China also have had “a disproportionate impact on the market for more expensive properties? On average, buyers from China pay $831,800 for a home, more than three times as much as Americans spend.”
Chinese rich’s investment and property rush in America is only a small part of the tidal wave of Chinese money that is pouring into the global economy. The amount of outflows into the U.S., noted Searcey and Bradsher, “follow a broader exodus of money from China to countries around the world.” Between June 2014 and June 2015, according to Fitch Ratings, a total of $590 billion had moved out of China.
China has overtaken the United Kingdom as Australia’s biggest source of immigrants. And for the first time, China has become the largest source country for total permanent migrants to New Zealand. In 2015 China has also become Australia’s biggest source of approved foreign investment, “Chinese investors,” reports Fleur Anderson of Australia’s Financial Review, “plan to spend $27.7 billion here according to the Foreign Investment Review Board annual report, overtaking U.S. investors who are approved to spend $17.5 billion.”
China’s rich are on a shopping spree all around the world. “In London,” write Searcey and Bradsher “Chinese investors are purchasing high-end apartments in wealthy neighborhoods and big skyscrapers in the financial district. In Canada, they are paying $1 million for modest Vancouver bungalows. In Australia, Chinese bought nine office towers, one of the biggest real estate transactions in that nation’s history.”
China today has the world’s largest outflow of cash and high-net-worth individuals. It is one of the biggest and most hurried wealth migrations of modern history. It is also perhaps one of the greatest ironies of our time: China is becoming a great place for some of its people to get rich, yet so many of its rich people are so eager to get out China.
Xiaoxiong Yi is the director of Marietta College’s China Program.