Singapore is emerging as a hot spot for these Chinese funds as Beijing tightens its grip on Hong Kong and challenges the international financial hub’s long-held reputation as a safe haven to park assets.
When major cities – including financial capital Shanghai – were locked down last year, investment immigration consultancies, wealth managers and family office advisers saw a surge in inquiries from Chinese nationals looking to move money – and themselves – to other countries.
That trend carried on after China abandoned its zero-Covid policy in December and threw open long-shut borders. Indeed, inquiries surged 600% month on month in January, according to London-based immigration consultancy Henley Partners.
“This is representative of the Covid policies, and the Chinese Communist Party’s regard to limit people’s lives and freedoms,” Joseph Fan, a professor specialising in finance and governance at Australia’s University of Queensland, told Nikkei Asia. “So, in preparation for the likely worst, they must cast their safety net overseas.”
Advisers to ultrahigh net worth clients, who spoke with Nikkei on condition of anonymity, said that the unprecedented two-month stay at home order for Shanghai’s 25 million people, on top of other tough pandemic counter measures, marked a turning point.
“Several clients made the move as soon as they could,” one said. “They either came to Hong Kong or Singapore.”
Now in his third term, President Xi Jinping is tightening his grip on power and exerting greater control over the world’s second-biggest economy, pivoting away from the opening up that began with the late leader Deng Xiaoping’s reforms in the 1980s.
Xi’s administration has tightened capital controls, including a renewed squeeze on Macao’s VIP gaming business. It has launched a wide-ranging regulatory clampdown on the private sector that saw some of China’s tech titans slapped with huge fines.
“After Xi Jinping came into power, there was a complete 180-degree change to policies implemented by previous leaders,” Fan said.
At the World Economic Forum last month, China’s vice premier Liu He tried to play down concerns about Beijing’s “common prosperity” drive, saying that policies to narrow inequality were “definitely not to introduce equalitarianism nor welfarism.”
Some Chinese entrepreneurs were shocked when Western governments sanctioned wealthy Russians after Moscow’s invasion of Ukraine, raising fears that they too could get swept up in tense international relations.
“They are concerned that as the geopolitical situation is becoming more complex, that their assets and lifestyle would no longer be safe in places like Europe, or America, or the Americas or Australia,” said Rupert Hoogewerf, chairman and chief researcher of the Hurun Report, which tracks the wealth of Chinese entrepreneurs.
China saw a net outflow last year of 10,800 of high net-worth individuals – those with at least US$1 million in assets – according to data compiled by Henley & Partners. That placed it just behind Russia, which recorded a net outflow of 15,000 rich citizens in the same period.
Hong Kong, which has seen an ongoing exodus of residents and expatriates in recent years, lost 3,000 high net-worth individuals, while Singapore gained 2,800 last year, the data showed.
The number of family offices in Singapore almost doubled to 700 between 2020 and 2021, according to the Monetary Authority of Singapore. It did not disclose their country of origin.
Loh Kia Meng, a senior partner and chief operating officer at Dentons Rodyk & Davidson in Singapore, estimated that up to half the new family offices established in the city last year were from China’s Greater Bay Area. The region encompasses Macao, Hong Kong and several southern cities including Guangzhou and tech hub Shenzhen. That is up from about 30% in 2019 before the pandemic struck, said Loh.
Singapore has launched a new five-year visa program to attract foreign investment, and wealthy Chinese are already inquiring about the initiative, according to wealth management advisers.
Offshore trusts set up by Chinese in Singapore grew 44% between 2021 and 2022. That is the highest level in the past five years, surpassing the 23% year-on-year rise seen in 2019 before the pandemic, said Harvey Chan, the business director of Payments Asia and a Hong Kong-based offshore trust adviser.
By contrast, Hong Kong’s trust growth was just 15% between 2021 and last year, he said.
“Previously there was not that much interest shown in Singapore by Chinese nationals, but the city state is emerging as a safe haven in Asia,” said a Henley & Partners spokesperson, who added that it was now the fourth most popular choice among asset-move inquiries after Portugal, Greece and Grenada.
Some remain optimistic that Hong Kong will regain its reputation as the “preferred choice” for China’s rich as it emerges from years of self-imposed Covid-19 isolation. The boosters point to easy access to the mainland, low taxes and planned tax holidays designed to attract family offices.
“Hong Kong is very attractive for mainland Chinese families who are keen to run their business in China,” Andrew Lo, head of family advisory and family office solutions for greater China at UBS in Hong Kong, told Nikkei. “(The city) is definitely the better gateway – it’s much closer.”