Monday, 17 February 2014

Getting Wealthy... and Getting Out

China's rich migrating in droves
US, Europe, Canada among top spots; Singapore slips from third to fifth place
By Grace Ng, The Sunday Times, 16 Feb 2014

For four years, Mr Luo Yong, 44, dreamt of migrating to Canada.

His hopes were dashed last Wednesday when news emerged that Canada had decided to scrap its 28-year-old investor visa scheme due to a huge number of applications from Chinese millionaires.

The scheme had been frozen since 2012 to clear the backlog. The latest development meant that an estimated 46,000 applications from Chinese citizens could be dumped, according to the Hong Kong-based South China Morning Post (SCMP) daily.

"My mind went blank at the news," said Mr Luo, who makes about half a million yuan (S$103,300) a year as manager of a Beijing-based firm. He had sent his 16-year-old son to a high school in Canada two years ago in preparation for the whole family's move there. "I couldn't believe it that I had waited so long for nothing."

Affluent Chinese like Mr Luo have made international headlines over the past few years for dominating investment-for-immigration schemes. They leave mainly because of China's food safety, and air and water quality problems, as well as its stressful education system.

The exodus of rich Chinese could accelerate further this year, as China's pollution woes deepen and the government cracks down on corruption and proposes to raise taxes on the rich to close a yawning income gap.

The proportion of wealthy Chinese who are planning to migrate abroad - or who have already done so - surged to 64 per cent from 60 per cent a year ago, a survey of over 393 millionaires released last month showed.

In fact, one-third of the 41 super-rich Chinese respondents - who have at least 100 million yuan in assets - have already migrated abroad, according to the survey by the Hurun Research Institute, which compiles an annual list of China's richest people.

The lure of foreign citizenship has seen almost 10 million Chinese leave their home country over the past quarter-century, said Centre for China and Globalisation (CCD) professor Wang Huiyao.

And wealthy Chinese have stashed away a cumulative US$658 billion (S$830 billion) offshore, estimated London-based consultancy WealthInsight.

For this year, the top-most popular destinations cited by respondents to the Hurun survey were the United States, Europe, Canada and Australia, in descending order. Singapore was at No. 5, added Hurun.

The Lion City has slipped down the rankings - in 2011, it had been the third most popular country after the US and Canada.

The slide came after Singapore raised the investment threshold for migration in 2011, according to Shenzhen-based firm China Business Immigration (CBIEC).

On its website, which lists the number of visa approvals for various countries, CBIEC stated it facilitated just five individuals in obtaining Singapore permanent residency, compared with over 130 cases - most of them for families - in 2010.

While previous waves of migrating rich Chinese had concentrated on mature and stable countries like the US, Canada and Singapore, the nouveau riche these days are diversifying into other places like Europe, Australia and even South Africa, said Ms Nancy Zhang, an immigration middleman for millionaires in China's prosperous eastern provinces.

Nine in 10 applications for Australia's one-year-old millionaire visa scheme are from China, SCMP reported last week.

Meanwhile, some debt-ridden European Union states such as Greece and Cyprus have raised eyebrows at home for allegedly offering their citizenship too cheaply to the Chinese in exchange for investment and loans to local governments.

Chinese entrepreneurs - and some officials - are apparently eager to bite.

"In China, it's not easy to be 100 per cent clean when doing business. So some Chinese who have made their fortunes are eager to get citizenship abroad quickly," said Ms Zhang, who declined to give the name of her agency.

"Getting a foreign passport is an exit strategy in case the corruption probes that (the government of President Xi Jinping) have been expanding over the past year target them."

Portugal, in particular, has been a hot spot, noted Mr Xiao Ming, a CBIEC marketing manager.

The agency has facilitated about 400 successful applications for migration to Portugal - a 100 per cent success rate - as of end-2013, he said.

"The rich Chinese's attention has shifted to Europe, especially Portugal where the immigration policy is clear-cut and without risk."

China's outflow of wealthy Chinese is likely to continue in the coming years, predicts Prof Wang.

Countries like the US and Singapore have launched schemes in the past year to attract more investment and high-level talent to their shores, and more Chinese are likely to respond, he added.

The CCD is among Chinese think-tanks urging Beijing to act to reverse this wealth and brain drain.

Suggested solutions range from cleaning up the environment to opening up more sectors to private investment so rich Chinese would keep more money at home, and schemes to attract foreign talent.

Meanwhile, the queue to leave is long.

Ms Lucy Fang, in her 30s, whose family applied to a few countries including the US and Britain early last year, is splitting her spare time between watching American sitcom Two Broke Girls and British hit serial Downton Abbey as part of her preparation for the move.

"I'll go to whichever country gives me residency first," said Ms Fang, who works in her family's interior lighting company in the eastern Zhejiang province.


Some investment-for-immigration schemes, in which for a certain amount of investment, investors get residency visas, which could pave the way for them to get citizenship later on:

1. United States: EB-5

US$500,000 (S$630,500) for investments in a high unemployment or rural area; US$1 million for investments not in these areas.

This grants a two-year conditional permanent residency visa; person can get a permanent green card after a review of the investment.

Other conditions*:
- Investment must create or preserve at least 10 full-time jobs for US workers within two years.
- Investment must be in a new commercial enterprise established after Nov 29, 1990. If the enterprise was established before that date, it must be reorganised such that a new enterprise results or expanded so that a 40 per cent increase in net worth or number of employees occurs.

2. Australia: Subclass 188

A$5 million (S$5.7 million) investment in items such as government bonds, managed funds and Australian companies for four years. This grants a permanent residency visa; person can apply for citizenship after six years.

Other conditions*:
- Clean criminal record.

3. Portugal - "Golden Visa" scheme

Purchase of a property in Portugal worth at least 500,000 euros (S$864,000).

This grants a permanent residency visa; person can apply for citizenship after six years.

Other conditions*:
- Must live in Portugal for at least seven days a year to maintain residency visa.

Must invest at least S$2.5 million in a new business entity or to expand an existing business operation, or in a GIP fund that invests in Singapore-based companies.

This grants permanent residency status and a re-entry permit will be issued for five years. After the five years, the permit will be renewed for either three years or five years if certain conditions are met.

Other conditions*:
- Applicant must have at least three years of entrepreneurial and business track record.If the company is in the real estate or construction-related sectors, its turnover must be at least S$200 million in the most recent year, or at least S$200 million a year on average for the last three years.
- For a company in other sectors, its turnover must be at least S$50 million in the most recent year, and at least $50 million a year on average for the past three years.
*Not comprehensive

Sources: News reports; US, Portuguese and Australian immigration authorities' websites; Singapore Economic Development Board

Chinese investors flood US visa scheme
By Melissa Sim, The Sunday Times, 16 Feb 2014

On the website of The Trapp Family Lodge - a resort run by a descendant of the von Trapp family that inspired The Sound of Music - is a page that seems out of place for a Vermont ski lodge.

Alongside buttons for "trail conditions", "specials" and "brewery" is one called "EB5VISA". Visitors who click on it get an ad - in Chinese and English - inviting investors to sink money into the resort's expansion in exchange for a US green card.

Owner Johannes von Trapp is not the first to turn to wealthy Chinese instead of banks for funds. Hundreds of US businesses have sought to tap into growing interest from Chinese looking to take advantage of a programme that gives residency visas to foreigners who invest at least US$500,000 (S$630,000) in the United States.

In the past few years - in line with growing Chinese wealth - a large number of wealthy Chinese have invested in US businesses to obtain the EB-5 visa. The Chinese made up about 80 per cent of the 8,564 EB-5 recipients last year and overtook the South Koreans as the dominant nationality applying for the visa in 2009.

Demand for the visa is so high now that the annual 10,000 cap could be reached this year for the first time since the programme was introduced in 1990. The authorities might have to impose a cut-off date for Chinese applicants as soon as July this year, which would mean a longer wait for those hoping to set foot in the US.

Already, EB-5 applicants must wait more than 18 months from the start of their application to the time they receive a conditional green card. Two years ago the wait was just six months, say lawyers. With this in mind, Chinese investors are scrambling to get their paperwork done.

Exclusive Visas founder Fred Burgess says his company's consultants and attorneys saw a 50 per cent increase in inquiries and applications in the first two months of this year compared with the same period last year.

Immigration lawyer Chuck Leamy, who has 22 years' experience in the field, says Chinese applicants "are rushing to get everything submitted so that they get a priority date and a place in the line".

Some lawyers are also advising clients to prepare their funds even before they find an investment project, just to speed up the process.

In particular, families with children approaching 21 are jumping into action, because a processing backlog could mean their children hit the age limit of 21 before they are able to obtain conditional permanent residency.

Apart from families, lawyers say another large group of applicants are young Chinese who are "gifted" a sum of money by their parents so they can apply for the EB-5 visa. This way, they need not obtain other forms of visa such as an employment visa, which would tie them to an employer.

According to a report released last week by the Association to Invest in the USA - a trade group that supports the investment scheme - the EB-5 programme brought in about US$1.8 billion during the 2011/2012 fiscal year and supported 33,134 American jobs.

Ms Rei Teng, an associate attorney at the Immigration Law Group, says the visa is popular with the Chinese because it is the easiest to qualify for.

"There are no requirements regarding age, gender, degrees or experience," she says.

Shanghainese entrepreneur Lin Xiaosen, 37, who is considering the EB-5 visa, says: "Compared to other destinations, the investment amount (US$500,000) is competitive."

The rush for US visas will also be accelerated by the recent decision by the Canadian government to scrap its investor scheme, which was particularly popular with mainland Chinese and residents of Hong Kong.

Mr Ronald Klasko, chairman of the EB-5 Committee of the American Immigration Lawyers Association, says he expects tens of thousands of these applicants to flood other investment-for-immigration programmes, including those in Spain, Australia and the US.

The Canadian government has also urged disappointed applicants to find other ways of getting into the country.

The scrapped programme will be replaced by a new Immigrant Investor Venture Capital Fund, which will require bigger investments from applicants.

Ironically, it was the popularity of the Canadian system that made Mr Bill Stenger, chief executive of Jay Peak Resort in Vermont, consider the EB-5 programme as a source of funding for his hospitality business.

"We are so close to Canada, and I heard about the Canadian programme, so I looked into the EB-5 programme in 2006," he said.

Since then, his company has attracted 600 investors from 74 countries who have put US$275 million into his projects, which include resorts, food and beverage outlets and, most recently, a biomedical park.

His biggest investor markets are China and Britain.

Says Mr Stenger: "We have a large market in China and backlog of the visa processing here will probably impact their interest in the US."

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