The latest Forbes report, according to New World Wealth and LIO Global, says about 91,000 high net worth individuals from the Chinese mainland have settled overseas in the last 14 years. The report categorizes the rich on the mainland as anyone with net assets of $1 million, not counting their primary residence, and says most of the mainland's rich are heading to the United States, Hong Kong, Singapore or the United Kingdom.
Why are wealthy Chinese so eager to leave the mainland? Hurun Consultancy, together with the Visas Consulting Group, did some digging and found that the main reasons are quite apolitical. The top three factors driving the millionaires' desire for emigration, with each accounting for 20 percent, were concerns over their children's education, pollution and food safety.
It is believed that some individuals are making exit plans to escape the recent crackdown on corruption targeting those with ill-gotten wealth. No one in China will miss them but the authorities need to stop them.
Americans whose anger at the super-rich is growing because of rising inequality might feel the same about millionaires fleeing higher taxes in the US - unlike their Chinese counterparts, rich Americans migrate mainly to ease their tax burdens.
But most of China's wealthy wannabe expatriates, especially the first-generation rich, made their fortunes honestly by dint of their ability and hard work. These individuals form an invaluable pool of entrepreneurial/business talent that China can ill-afford to lose as it seeks to make markets more important in its economic growth model.
To be sure, not all of those expressing a desire to leave will actually do so. Liam Bailey, a researcher with Knight Frank LLP says in a Barclays Report: "Most ultra-high net worth individuals are probably making money in China now. So for business reasons, they need to be relatively close."
While such people may stay put, they could transfer more of their wealth overseas. Hurun estimates that from 2012 to 2014, rich Chinese invested 16-19 percent of their wealth abroad.
In 2014, China had a service trade deficit of $198 billion, which was widely regarded as new channel of capital outflow. And it is estimated that $300-400 billion of capital outflow this year might hinder China's ability to prop up its economy.
China does have huge foreign exchange reserves, $3.7 trillion to be precise. But Victor Shih, an economist, has noted that the top 1 percent of China's wealthiest households controls assets equivalent to at least two-thirds of China's foreign exchange reserves and, he warns, if they moved 30-40 percent of their wealth overseas, they would deplete the country's reserves by $1 trillion.
Improving the environment and education system in China, two of the three main reasons why millionaires wish to leave China, is a difficult and long-term task. But in the meantime, the Chinese government ought to build upon its earlier efforts to boost the safety net for ordinary people in order to increase their incomes and thus expenditure, and lessen inequality. Reducing the concentration of wealth in China would go some way toward making the country less vulnerable to the whims of its restless and footloose rich.
The author William Daniel Garst is a research fellow at the Center for China and Globalization.
