Wealthy see greener grass abroad
Updated: 2011-11-09 08:03
By Zhang Monan (China Daily)
On Oct 20, The Wall Street Journal reported that two US senators are preparing a bill to give residence visas to foreigners who spend at least $500,000 to buy property in the United States. The report garnered a lot of attention in China, and for the past two weeks, US realty agencies have received numerous phone calls from people in China inquiring about how to purchase a house to obtain a green card.
Emigration to the US has been on the rise in China in the recent years. In June 2010, the US Employment Development Lending Center introduced its new investor immigration program in Beijing, which permits Chinese applicants who invest $500,000 in small and medium-sized enterprises to obtain green cards in about three years. Chinese residents have flocked to the program since then, which is good news for the US because it can stimulate its economy with investments from emerging market economies.
But there is concern in China about the exodus of its wealth and talent, and it faces a great challenge in keeping hold of its wealth creators and their money.
It is already common practice for many developed countries, faced with aging populations, outflows of investment and withering domestic demand, to attract investors with favorable polices. And these policies have attracted a new wave of immigrants from China, this time mainly investors and professionals. A recent survey found that over 60 percent of wealthy Chinese people are willing to emigrate. The US, Canada, Australia and Singapore are the favorite destinations due to their simple procedures and low investment limits.
According to US data, in the 2009 financial year, investor immigrants who gained green cards by investing $500,000 were three times more than the previous year, and those from China accounted for almost 50 percent. In the 2010 financial year, over 70,000 Chinese gained US green cards, a number second only to Mexico.
The "2011 China Private Wealth Report", jointly released by China Merchants Bank and Bain & Company, shows a 73-percent growth in investor emigrants during the past five years, of which 27 percent have already migrated abroad while 47 percent are considering the choice, which means the number is still growing.
Cross-border migration is a normal trend in this age of globalization, but such a large single-direction flow means a comprehensive loss of wealth, human resources and consumption for China. "Reports on Global Politics and Security in 2007", issued by the Chinese Academy of Social Sciences, revealed that China, as the largest source of migrants, has lost the largest number of talented professionals. If this trend continues it will not only hurt the Chinese economy in the long run, it will also prevent it from building an olive-shaped society with a large middle class, because a great proportion of the emigrants are middle-class professionals.
Without doubt, the skyrocketing living costs, worsening environment, poor social welfare and growing tax burden in China are partly responsible for this loss. Compared with Western countries, whose social welfare spending accounts for one third to one half of their total budgets, or 20 to 30 percent of gross national product, China only spends 7.6 percent of the government budget on social security, 2.7 percent on healthcare and 4.5 percent on education. It is natural for people to choose a place to live where they think they will enjoy the best quality of life.
Better prospects in developed countries are another attraction to investor immigrants from China. After the 2008 global crisis, many countries including the US issued low-interest and even zero-interest rate loans and offered training and other relevant services to overseas investors. In contrast, China has lagged far behind in these areas.
To hold on to its material wealth and human resources, China should introduce strategic measures to promote the free flow of economic resources, break monopolies and ease the tax burden for producers and consumers, so as to promote fair competition and efficient management of the market.
Only by making the country more attractive to its talent can China keep them and their wealth from leaving.
The author is an economic researcher with the State Information Center.