China’s super rich are voting with their assets – and fleeing Xi’s regime

It’s no wonder that rich Chinese have been planning escape routes for their money and themselves. Increasingly, they’re turning to Singapore, the city-state dubbed “the Switzerland of Asia”. In some ways, this is nothing new. China’s opening up since Mao’s death has been paired with incremental reforms to capital control.

Wherever possible, Chinese elites have been stashing their money offshore. It’s sometimes just good business to make use of favourable interest rates abroad or diversify the currencies your wealth is held in. But for many, a major consideration has always been that you could never guarantee your wealth would remain yours under a Communist system. 

In 2015, in the aftermath of Xi’s anti-corruption campaign, an estimated £800 billion of wealth was evacuated out of China. In the end, the central bank was forced to spend a similar amount to prop up the yuan, after which capital controls were tightened.

But there’s renewed urgency now, and with the end of zero Covid, money and people can move around much more freely than in the previous three years. In 2022, around £36 billion left the country under the category of “errors and omissions” according to official data, suggesting “the exit of residents’ money in an unofficial way”, according to the economist Alicia Garcia-Herrero.

Trust between the wealthy and the government has been destroyed. It’s not just the occasional disappearance, but also the way Xi Jinping has crushed China’s homegrown Silicon Valley through punitive fines and forced resignations. Much of this has been done in the name of “common prosperity”, with rumours that a wealth tax might be on the way. This year, Beijing has also renewed its anti-corruption campaign, targeting the financial sector in particular.

And under zero Covid, the hand of the state intruded into every part of people’s lives to an extent not seen since the Cultural Revolution. For the liberal minded, Chinese politics seems to be going the wrong way, while the business minded simply wonder how long they can keep their money – and themselves – safe. 

This anxiety was revealed in a curious 60-page critique of Xi Jinping from last year. It was an anonymous Chinese blog which went viral, impressively well-informed and ruthlessly critical of the President. “China’s political elite feel panicked, and want to move their capital out before the country is bankrupted”, the author wrote. Their grasp of the CCP’s internal machinations raised questions of whether the author was in fact a Party insider, perhaps hoping to destabilise Xi ahead of the National Party Congress.

So where is safe for the discerning investor? In previous years, the choice would have been Hong Kong, but that’s now under Beijing’s control. This was clear as far back as 2017 when a Chinese asset manager was abducted, by mainland police, from Hong Kong’s Four Seasons Hotel. His disappearance shocked the city, foreboding the death of the “one country, two systems” arrangement. One Hong Kong based economist tells me that’s when most prescient Chinese started getting their cash out. 

Three years later, the National Security Law resolutely scrapped any remnants of “two systems”. It gave Beijing the powers to freeze the assets of anyone charged under the new rules. So Jimmy Lai, owner of Hong Kong’s now-shuttered pro-democracy Apple Daily newspaper, saw his fortune frozen when he was arrested. He’s now in the maximum security Stanley Prison, serving a five year sentence. One high net worth individual, from mainland China, tells me that even her Hong Kong-based private bank is urging her to move her assets into Singapore. 

The former British colony is still very Chinese: three-quarters of the people there are of Han descent. It has famously low taxes and a high standard of living – but its main advantage is that it’s not under Beijing’s thumb. So in 2021, it saw a record £270 billion inflow of assets under management, almost twice as much as flowed into Hong Kong.

Rents have increased by 30pc in the last year, while anecdotally, headmasters of international schools, luxury car salesrooms, accountants and immigration lawyers in the city all report a massive increase in interest from the Chinese.

The number of “family offices” tending to the super-rich has almost doubled to 700 over the last two years, with some estimating that the number will soon hit 1,500. Singaporean paper Lianhe Zaobao reckons investors from Hong Kong, Macao and Guangdong make up almost half of the new offices. It’s an attractive, safe and obvious escape route for the not-crazy rich Asians. 

But nobody knows how long this escape route will last. Locals are already complaining about the new Chinese arrivals pushing up prices, while Singaporean authorities have quadrupled the threshold for an investor visa to £6 million. And from Beijing’s perspective, given its experience from 2015, how long will it wait before acting to stem the deluge?

The Financial Times reports that when Bao Fan went missing, he was also preparing to move some of his money to Singapore. He doesn’t seem to have made it in time. His peers will want to avoid making the same mistake.