Market research China: What are the effects of the wealthy Chinese going abroad for China?
China rapid growth is something everyone is talking about. With an average 7% growth fortunes are often made very quickly. Sure, often only the top are mentioned in the news but there are about 1million rich Chinese out there, the 1% including 67000 super rich (net private worth over 100 million in private assets excluding things like real estate.
A steady growth for China’s super rich with a leak
Their number keep increasing in a steady growth, making China second to none except the US when it comes to how many rich people they have.
Their repartition in China
The data show that 47%, nearly half of the Chinese millionaires are located within only three provinces:
Beijing: This can be easily explained, since Beijing is China seat of power. A lot of Chinese millionaires are involved in politics and have strong ties with the party. They therefore want to stay close to what happens. Besides, living in Beijing, even only in the suburbs is a sign of social success.
Guangdong: Mostly because of Shenzhen the Guangdong province is the wealthiest province of all China with a steady growth of about 20% per year. It is one of China’s main business centers. This is even truer since the return of Hong Kong to China by the British. This allowed the province via Shenzhen to have really strong ties with one of the cities, most well known for its numerous business opportunities, hence the important number of Wealthy Chinese.
Shanghai: This city is literally the economic heart of China symbolized by its pearl tower, it has been heavily westernized. In the city above the sea you can have the most luxurious products and brands you can think of as well as great business opportunities since companies from all over the world.
The repartition of millionaires abroad:
According to the data shown by market research, the United States is well ahead of the ranking but China is catching up.
Wealthy Chinese going abroad
Chinese rich people are more and more eager to move out of the country hoping for a better life. According to the last market survey they were 64% to want or to already have done so in 2013.
One of the main destinations has been the US for quite a while.
How important wealthy Chinese going abroad has it been?
The EB-5 program for importer investors to receive the famous green card that grant permanent stay in the US has reached its quota for the first time. This means that the number of rich or very rich people is most likely to increase in the US.
However by closing their programs tailored for rich people they help other destinations to benefit from this rich Chinese emigration.
The new destinations to benefit from the closing of the US visa program
Despite all the tensions at the top levels between Japan and China, Japan stays a well-liked destination for wealthy Chinese to immigrate to. With an aging population and a need for foreign investment the investment condition are very good. Visas are also made easier to obtain since the wealthy Chinese fall into the “expert, qualified” category Japan so desperately needs.
After this come European countries such as Germany and France for their quality of life.
Reasons for leaving China for wealthy Chinese
The Chinese millionaires want to leave mostly for the following reasons
Top three reasons for wealthy Chinese for going abroad are
- Diversifying assets to dilute the risks.
Chinese culture is very much risk averse unlike other countries like Americans. Chinese companies tend to sign contract much much more slowly than American ones. Why? It is simply because Chinese are culturally more careful. Spreading assets gives a more secure situation.
- Children’s education:
Family matters for Chinese people, wealthy Chinese want to move abroad to give better life opportunities to their children
- Retirement planning:
With a lack of proper retirement system in China except being taken care of by the family, Chinese who have reached that state may want to invest into a retirement plan.
Chinese are not leaving the country that quickly however.
What’s holding them back is the fast economic growth of China that allows them to make money. Since its growth is about 7% a year for wealthy Chinese it is still worth it to stay in China.
They want a better life with
- Better healthcare,
- Better Education for their children
- Better environment
What will the consequences be if wealthy Chinese do leave?
It will be a loss of investment, a loss of highly capable people for China which would definitely impact China on the long run.
Since the cause of departure have been identified, let’s take a look at what could be done :
- A better healthcare system
- A better educational system for children from primary school to university inspired by the destinations most chosen by the millionaire for their children. Indeed, all the Chinese schools have similar systems which are very military-like. While teaching good values such as the respect for the teachers, the Chinese educational system is far from being the best.
- Effectively and drastically improving the environment through education to avoid further degrading natural sites (beaches…).It would also be important to lessen pollution coming from industry and set measures to purify the water reserves that are currently known to be polluted.
This sort of measures wouldn’t be only for the wealthiest but for the rest of the nation as well. Middle class aspire more and more to have better life conditions. This is why Chinese leave the country for the holidays rather than exploring and spending money in their country. Sure, compared to the whole population of China it is still a “small” proportion: 100 million of Chinese tourist going abroad every year (10% of the total population) However within this population you have an important part of the qualified workers, not just work force.
To conclude, if China doesn’t do anything the same thing that happened in other countries such as France with its researchers will happen to China with its upper middle and upper class: a leak of skills to other countries where life is better.
China should be careful and meet the requirement of its wealthy people to avoid them leaving.