China's Super-Rich Buy a Better Life Abroad

China's Super-Rich Buy a Better Life Abroad

Self-made millionaire Li Weijie runs his own ski and golf resort outside Beijing and considers himself a patriot: A lifesize statue of Mao Zedong on a four-meter base towers over the entrance to his resort. What would Chairman Mao say if he knew Li was the proud holder of a Canadian residency card? “I wanted access to the education system and health care of a developed country,” says Li, 43, whose other businesses include one of Beijing’s largest private taxi companies, two car dealerships, and a real estate company. Li now has a $6 million house on Vancouver’s Westside, known for its rich Chinese. His wife tools around Vancouver in a black Maybach while his 20-year-old son drives a dark gray Maserati to classes at the University of British Columbia. His wife and son live in Canada full-time.

What began as a trickle a decade ago when Li moved his family to Canada has become a flood as China’s new rich seek foreign passports or residency permits (commonly known as green cards in the U.S.) largely from the U.S., Canada, Australia, Singapore, and New Zealand. More than 500,000 Chinese have investable assets of over 10 million yuan ($1.57 million), according to a joint survey released in April by China Merchants Bank and Bain & Co. The study says almost 60 percent are considering emigrating, have begun the process, or have emigrated.

In the U.S. so far this year almost 3,000 Chinese citizens have applied for investor visas, up from 270 in 2007. That’s 78 percent of the total applicant pool for this type of visa, according to U.S. Citizenship and Immigration Services (USCIS). The U.S. investor visa, also known as the EB-5, requires a minimum investment of $500,000 by the applicant in a commercial project in the U.S. that employs at least 10 Americans within two years. If the Chinese applicants can’t generate those jobs, they and their family may have to leave the U.S.

The drive to emigrate makes for brisk business for people like Jason Zhang, a broker at Realty Direct Boston, a branch of a nationwide chain. Zhang’s office specializes in settling Chinese in the Boston area. He says this year he has already helped dozens of Chinese families purchase homes and cars (the émigrés often pay in cash, he says) and find the right schools for their children, up from just two or three families in total a few years ago. Wealthy suburbs like Weston and Lexington are top choices.

For the most part, China’s richest aren’t permanently fleeing their country, as some Russian oligarchs have. About 80 percent of the wealthy Chinese emigrating don’t plan on giving up their passports, according to an October survey by the Bank of China and Shanghai-based Hurun Report, which publishes an annual ranking of China’s richest people. Instead, the most common model is that of Li Weijie: Wife and child get foreign passports and live abroad, husband gets a residency permit but spends most of his time in China. “If you think of emigrating like Russians, it is because they are afraid and so are leaving their country,” says Hurun’s founder, Rupert Hoogewerf. “This is not true of the wealthy Chinese at all. They still have their businesses in China and most of their assets are in yuan.”

So why are they looking at residency abroad? The top motive cited is to pursue better educational opportunities for their children, according to the Bank of China-Hurunand China Merchants-Bain surveys, as well as comments from émigrés. The feeling among rich Chinese is that U.S. universities beat out their Chinese equivalents, and their children need to understand the world. Émigrés note that top Chinese leaders such as Xi Jinping, likely China’s next president, send their children abroad to study. Escaping dire air quality and food safety problems are also factors.

Moving a family abroad and obtaining foreign residency cards could also prove useful in case of sudden legal or policy shifts that hurt entrepreneurs, or if social unrest reaches a boiling point. So-called mass incidents—riots, strikes, and protests—doubled in five years, to 180,000 in 2010, Sun Liping, a professor at Beijing’s Tsinghua University, wrote in a Feb. 25 article in the Economic Observer. “Some people in China are talking about class conflicts against rich people,” says Wang Xiaolu, deputy director of the National Economic Research Institute in Beijing. “Maybe some of those emigrating or getting residency are worrying about possible policy changes turning China ‘left’ that will put them in danger.”

One émigré in Boston (who asked only that his last name, Yang, be used since he still owns a factory in China) points out that the Chinese government spent more money on internal security (549 billion yuan) than on defense (534 billion yuan) in 2010. He says that if things got ugly, the rich would be targets not just for being rich but for their close connections with the government. Most of China’s wealthy have an “original sin,” or some illegality relating to earning their “first bucket of gold,” says Yang.

“China develops so fast, and the society is unstable,” says Shengxi “Tina” Tian, an attorney at MT Law, a firm based in Burlington, Mass., that helps wealthy Chinese emigrate to the U.S. Tian points out that the émigrés appreciate the rule of law in the U.S., Canada, and elsewhere.

Some wealthy émigrés are nervous talking openly about why they have sought foreign residencies. “For us businessmen, we go wherever is safe,” says another recent émigré in Boston. “China’s political system and legal system make us feel insecure,” says the businessman, who still runs a furniture business in Shanghai and would not allow his or his company’s name to be used. He later refused to talk further and instead declared his devotion to the Party.

In China, more than 800 licensed emigration service companies (and possibly hundreds more without proper government approvals) coach applicants for visa interviews, help them fill out forms, and identify possible overseas investments. Beijing-based Well Trend United, one of China’s oldest and largest emigration service companies, charges up to $30,000 per client. Well Trend, which has offices in 10 of China’s largest cities and more than 400 visa consultants and agents, says it has helped more than 10,000 Chinese get overseas visas since it opened in 1995. Business will remain strong for at least another decade, says founder Larry Wang. “It helps the U.S. get certain capital while Chinese can realize their dream of seeing the world. It’s supply and demand.”

A serious issue for both the Chinese applicants and their prospective host countries is the origin of their wealth. To ensure that those with criminal backgrounds aren’t let in, and to make sure they’re truly affluent, officials of the U.S., Canada, and other countries want thorough documentation of their assets. That can be difficult. “Wealthy Chinese almost all have a history of evading taxes,” says Gao Tong, who emigrated to Boston six years ago and is now setting up his own immigration services company called Harmonia Capital USA, with his brother, a wealthy Shanghai businessman. “They fear getting caught if they have to report their income globally.”

Some middlemen collude with clients to forge documents, say Well Trend executives, since many émigrés don’t have papers to prove the origin of their finances, or they may have gotten rich through illicit means. “There are more than a few bad apples,” says Victor Lum, a vice-president at Well Trend and a former Canadian visa official. “USCIS takes allegations regarding EB-5 program malfeasance very seriously,” USCIS spokesman Christopher Bentley wrote in an e-mail.

Longer term, if China’s economy continues to grow, the emigration surge could abate. Ski resort entrepreneur Li says some of his friends are reconsidering plans to get foreign residency. In part that’s because of stricter rules in Canada and elsewhere. And while rich Chinese still crave Canadian or U.S. degrees for their children, they may see less reason to emigrate. “When I first went to Canada, I thought China was very backward and it would take 50 years for us to catch up,” says Li. “After 10 years, we can all see that China will absolutely surpass the rest of the world.”


Securities Disclaimer

This website is for informational purposes only and does not constitute an offer or solicitation to sell shares or securities. Any such offer or solicitation will be made only by means of an investment's confidential Offering Memorandum and in accordance with the terms of all applicable securities and other laws. This website does not constitute or form part of, and should not be construed as, any offer for sale or subscription of, or any invitation to offer to buy or subscribe for, any securities, nor should it or any part of it form the basis of, or be relied on in any connection with, any contract or commitment whatsoever. LLC and its affiliates expressly disclaim any and all responsibility for any direct or consequential loss or damage of any kind whatsoever arising directly or indirectly from: (i) reliance on any information contained in the website, (ii) any error, omission or inaccuracy in any such information or (iii) any action resulting therefrom.