There has been much talk recently of a study by China Merchant’s Bank and Bain claiming that a surprisingly large number of China’s wealthier citizens have been moving assets overseas, purchasing property, and obtaining foreign passports. A portion of this is also supported by official government figures. For the most wealthy, the destinations are the Anglo-Saxon countries, as well as Hong Kong and Singapore. Some, according to the report, are even decamping to Russia.
In the ensuing analysis of this, many have put forth the idea that this represents a very troubling brain and wealth drain for China, while others think many of these new rich are merely hedging their assets and keeping their options open, and not really leaving China. And certainly one does not have to leave China to move assets and get another passport.
Both arguments are valid, and it’s probably hard to isolate a single motivation. A good number of high net worth persons from diverse countries have properties in more than one country, and often have more than one passport. Countries like Canada, the US and Australia are immigration cultures with sizable Chinese communities, and it’s not difficult for a Chinese to fit into these societies- especially for those who had attended university or previously lived there.
At the same time, it is also true that some new HNW Chinese may feel more secure with their assets diversified. I doubt there will be a big exodus only for this reason though. Many Chinese can do well in other societies, though likely feel most comfortable on their own turf, speaking their own language, with their network of family and friends around. Furthermore and importantly, China is where their income is generated.
But maybe we need to look at another angle in all this. There was another much-discussed report that came out in early 2011, from McKinsey, on the potential of China’s luxury goods market. The report basically argues that Chinese consumers will spend a lot more money on luxury items in the coming years- Swiss watches, French wines and bags, and art collection, etc. No doubt this is true, and the trend is already visible.
This notion is also deceptive- not on McKinsey’s part, but on the idea or implication that Chinese wealthy are going to direct a good amount of their money to luxury items, or “things” in general. Or that such things, however attractive, can capture the imagination or aspiration of this group. The definition of wealthy or high net worth is variable, but even including the lower strata of this group there is a limit that one can spend on luxury items, and while tangible and glamorous these are not the priority.
So what is the priority? Where are China’s new wealthy going to spend their money? Many are now just facing this issue, priorities vary, and this period of sorting-out will take some time. Charity is also slowing coming into the picture- slowly. However, there are several early indications of where aspirations lie, which we can roughly label quality of life and children (not that these are mutually exclusive….).