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China’s rich people find “another alternative”
Since protests disrupted Hong Kong’s economy in 2019, wealthy Chinese have been looking for alternative places to store their wealth. Singapore has become a hot spot with its large Mandarin-speaking population and unlike many countries, it doesn’t have a property tax.
The trend seemed to pick up last year after Beijing abruptly clamped down on the education sector and emphasized “common prosperity” – adequacy for all instead of just a few.
This was revealed according to CNBC interviews with companies in Singapore that are helping wealthy Chinese move their wealth back to the city through the family office structure.
A family office is a private company that undertakes investment and asset management for a wealthy family. In Singapore, setting up a family office usually requires assets of at least $5 million.
In the past 12 months, requests to set up a family office in Singapore have doubled in Jenga, said Iris Xu, founder of the five-year-old corporate and accounting services firm. She also added that the vast majority of requests come from people in China or migrants from within the country.
About 50 of her clients have opened family offices in Singapore. Each has a net worth of at least $10 million, Ms. Xu said.
China’s rapid economic growth has created hundreds of billionaires in just a few decades. According to Forbes, hundreds more joined their rankings last year. The data shows that this number brings the total number of dollar billionaires in China to 626, second only to 724 billionaires in the United States.
However, mainland China has strict capital controls, with an official limit of $50,000 a year in foreign exchange. This has limited investment options and kept their assets safe.
Xu said her Chinese clients “believe there’s a lot of opportunity to make money in China, but they’re not sure if it’s safe for them to send money there,” according to CNBC.
“BILLIONcommonwealth” and how to immigrate by family office
Ryan Lin, director of Bayfront Law in Singapore, said many people have moved assets to Hong Kong, before moving them to Singapore.
“This trend has started since the 2019 protests in Hong Kong made many Chinese people think about property safety,” Lin said. He said this trend has increased in 2021 after strict regulation of the education sector and after Chinese President Xi Jinping’s statement on shared prosperity.
In a speech last year, Mr. Xi called for curbs on “excessive” income as China sought to realize its vision of shared prosperity and reduce inequality between rich and poor.
Those comments come after months of increased scrutiny of China’s major tech and education companies, as well as property developers. All industries have created huge fortunes for founders and executives in just two decades.
Ms. Xu said restrictions related to international travel also spurred the interest of China’s wealthy in setting up family offices in Singapore. The country has a global investor program that allows adults who invest at least S$2.5 million ($1.8 million) to apply for permanent residence.
Since the beginning of the pandemic, some Chinese nationals have noticed that the Chinese government may suspend passport renewal and issuance services under the pretext of virus control.
In response to an online question in August about the passport suspension, China’s National Immigration Administration said it would only issue those documents to those with a necessary or urgent reason to leave the country. country.
The family office boom How long can Singapore’s last?
Many billionaires worldwide have used family offices to manage their wealth. Singapore also becomes attractive as its location offers investors other investment opportunities in Asia.
Since late 2020, Bridgewater founder Ray Dalio and Google co-founder Sergey Brin have opened family offices in Singapore to take advantage of the country’s tax-friendly policy, as reported by Bloomberg.
By 2020, there are about 400 family offices in Singapore, according to the nation’s Economic Development Board. Authorities have not updated numbers since late 2021 and did not provide additional comment to CNBC.
Local companies supporting the establishment of a family office in Singapore estimate there could be hundreds more now.
The Russia-Ukraine conflict has brought instability to Chinese nationals who want to open family offices in Singapore.
Contrary to China’s attempt to take a neutral stance on the conflict, Singapore joined the US and EU in imposing sanctions on Russia earlier this month, which is said to have frozen financial resources. local bank accounts held by sanctioned Russian individuals and entities.
Ms. Xu’s Jenga said news of the asset freeze had prompted some Chinese potential clients to halt plans to open a family office in Singapore.
However, Xu and Lin from Bayfront said demand from Chinese people looking to open a family office in Singapore increased this year at a similar rate to 2021.
But it’s unclear whether the interest in Singapore means the city has gained a significant edge in its long-term competition with Hong Kong as a financial hub.
Singapore is considering a range of wealth taxes – including capital gains tax, dividends and net wealth tax levied on individuals, Finance Minister Lawrence Wong told CNBC last month.
Ms. Xu said that Hong Kong financial professionals have a long track record in money management and some Hong Kong wealth managers will come to Singapore looking for potential clients.
“If Singapore can’t catch up in providing quality wealth management services, China’s assets will still be managed by experts from Hong Kong. After all, family offices are not subject to disruption. restrictions on where they invest,” she said.
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