Home » Business » Biz Special
Wealthy Chinese in race to move money offshore
Print Edition
FOR many in the ranks of China’s wealthy, the shock devaluation in the yuan is a cause of regret — that they hadn’t moved more money offshore sooner.
Now many are scrambling to shift cash out of the country, fearful that Tuesday’s 2 percent devaluation is the start of a longer-term slide in the currency, despite the People’s Bank of China saying there is no basis for more depreciation.
“With the devaluation, I’ve just lost several hundred thousand yuan,” said businessmen Tang Wei, who is moving assets out of China, partly to fund the living and schooling of his son in Canada next year.
“In my case, there’s a real need for foreign currency, so it would be better to move money out sooner than later. China’s economy doesn’t look very good.”
There are now about 4 million households in China that have private wealth of at least US$1 million, according to Boston Group Consulting.
Private bankers said last month’s stock market turmoil had already prompted many of them to make more investments overseas. Those will have added to the capital outflows China has seen over the past year, which have been fueled in part by expectations that the United States will raise interest rates by the end of the year.
Hot money
Analysts at JPMorgan said that about US$235 billion of “hot money” left the country between the third quarter of last year and the end of the second quarter of this year.
If expectations build that more depreciation is on the cards, the central bank will face a dilemma of whether to let the currency stay weak or support it to ensure the flow of money going offshore doesn’t turn into a flood.
“We believe a key concern for the PBOC is that an outsized exchange rate devaluation could trigger capital flight,” economists at Credit Suisse said in a research note on Tuesday.
That concern was reflected in a press conference yesterday, when the central bank tried to soothe market concerns by stressing that Tuesday’s move was a one-off.
Despite the calming words, money managers say many of China’s wealthy are unlikely to let their cash ride on the ability of authorities to put a floor under the yuan.
“At this point the frenzy will be higher after the devaluation because they would start looking into harder assets on expectations of more devaluation,” said Kunal Ghosh, Singapore-based portfolio manager at Allianz Global Investors, who helps manage US$1.8 billion in emerging market assets.
Tan Jialong, chief executive of Tan Private Wealth Management Office in Shanghai, said that since May there has been an increase in queries from his clients in China about overseas asset allocation.
“Many clients had question marks about China’s economy,” he said.
“I advised them at that time to increase their overseas exposure.”
He helps them move money through official offshore investment channels such as the qualified domestic institutional investor program and cross-border investment products.
Capital controls restrict Chinese residents from taking more than US$50,000 out of the country each year.
However, many find ways to circumvent this, reflected in the fact Chinese mainland citizens are some of the biggest foreign buyers of property in markets like Australia, the United States and Canada.
“Residential property is always a popular choice if you are trying to move sums of money less than US$5 million,” said Oliver Barron, an analyst at China-focused investment bank NSBO.
“If you need to get more out, buying companies looks best,” he said.
For those looking for more liquid assets, ones denominated in US dollars are likely to be their first choice.
“They will look at wherever they conceive they can preserve their wealth without any value erosion. At this point the US dollar is looking like the safest haven,” said Allianz’s Ghosh.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
