What is prompting the sudden departure of millionaires from China?

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Tracking billionaires is challenging due to their elusive nature, driven by the desire to minimize tax exposure. However, there is a reported decline in the number of ultra-wealthy individuals in China. Forbes indicates that out of approximately 2,640 billionaires globally, at least 562 were located in China, down from 607 the previous year.

The decline is attributed to increased scrutiny on financiers and a turbulent political environment, prompting many wealthy individuals in China to seek ways to move both their wealth and themselves out of the country. Despite official restrictions allowing individuals to transfer only $50,000 annually, the affluent employ various methods, both official and unofficial, to shift funds abroad.

Factors contributing to this trend include crackdowns on illegal foreign exchange transactions, estimated outflows of $150 billion annually before the pandemic, and a weakened yuan coupled with high US interest rates. The first half of 2023 saw a $19.5 billion shortfall in China’s balance of payments data, indicating a potential capital flight.

Uncertainty about economic policies and business opportunities in China, coupled with President Xi Jinping’s emphasis on “common prosperity,” further motivates people to move their savings abroad. The recent shift in China’s approach, emphasizing political control over economic freedom, has led to punitive measures against the wealthy class, prompting considerations of diversifying assets outside China.

There are increasing instances of wealthy Chinese relocating to nearby locations, with over 10% of luxury condos sold in Singapore in early 2023 going to mainland Chinese buyers. The number of single-family offices in Singapore, serving Chinese clients, has surged from 50 in 2018 to around 1,100. Additionally, a growing number of high-net-worth individuals are expected to leave China this year, reaching 13,500, as compared to 10,800 in the previous year. The trend reflects concerns about political risks and diminishing opportunities for wealth creation within China’s evolving economic landscape.

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