Saturday 19 Jan 2019 | 20:40 | SYDNEY
Saturday 19 Jan 2019 | 20:40 | SYDNEY

Attracting China's wealthy: Do investment visas need reform?



12 November 2014 14:47

My mum back home in New Zealand has moved house. Her retirement flat is inside a newly built community surrounded by comfortable McMansions, quite a change of scene from her old working class suburb. Her neighbours are also very different. Chinese residents are strikingly predominant. Mum's real estate agent told me his core clientele is 'rich Chinese', and then delivered his old punchline: 'is there another type of Chinese?'

His quip reflects a typical view. Some of mum's neighbours have availed of 'investment visas' (IV). Many countries are offering these schemes and the take-up from mainland China has been enthusiastic: 91% of Australia's IV applicants and 85% of America's are from China.

Now questions are being raised about IVs in the receiving countries.

Partly the criticism is just outright xenophobia. In New Zealand the 'old Chinese', long settled, are fully accepted as Kiwis. The gold-mining town where I grew up had sixth-generation Chinese New Zealanders who were far more rooted than my own family. Political scientist James To has examined the bamboo network. He notes that historical immigration is respected or even revered, while new arrivals are viewed suspiciously. As journalist Martin Jacques observes, the overseas diaspora sees it the other way around; recently emigrated mainlanders are the more authentic Chinese.

Politics plays a role too. James To says working-class immigrants are thought to assimilate better, whereas 'golf club' enclaves generate resentment. In Australia and elsewhere, incoming Chinese are blamed for skyrocketing house prices. A related gripe is that Chinese students dominate the best schools (although it is a curious complaint that elite schools are made tougher by better competition). A darker view holds that more numerous mainland Chinese now are crowding out the older Hong Kong, Singaporean, Malaysian and Taiwanese communities, and bringing instruments of PRC state influence with them.

Fiscally hungry governments have long sought wealthy immigrants; now Chinese are targeted. Many IV programs today are woefully unambitious. European countries are offering citizenship for chump change, requiring only a few hundred thousand euros in an apartment, or an investment in government bonds. Canada controversially scrapped its IV scheme (C$1.6 million minimum) earlier this year after being overwhelmed by '46,000 Chinese millionaires.' That kind of money buys a nice house, but brings little economic benefit. Many Chinese own multiple homes abroad, suggesting that countries like Canada are selling citizenship, and its comfortable middle-class security, far too cheaply.

To be sure, concern isn't confined to just Chinese-directed programs. But recently the IVs from China have been raising questions about corrupt capital flight. FT's Jamil Anderlini first uncovered Operation Fox Hunt in New Zealand, involving a special squad dispatched from Beijing to recover illegal monies and possibly to return crooked officials to China for prosecution. The Chinese even have a term — 'naked' — to describe officials who shield their relatives in safe countries. Fox Hunt is also active in Australia, where the government is modifying its IV program to better track illicit money flows.

Anderlini raises some squeamish questions about how the New Zealand authorities would (or even if they should) cooperate on this matter with China, with which it has no formal extradition treaty. Beijing is even offering governments a bounty of up to 80% of recovered wealth, depending on their level of cooperation. Canada agreed to an asset-sharing arrangement last year. Beijing, which prizes its sovereignty and privacy, has been uncharacteristically open and offers to host a regional anti-graft organisation. It is surely not in any country's interest to be seen as a feathered nest for corrupt bureaucrats. China's pursuit of them is legitimate, and popular at home.

Zhou Xiaoping is a nationalistic blogger. He loves China, and even though he's never been there, despises the US for its familiar drudges: pricey health care, industrial food, expensive schools and housing, long commutes, gun violence, etc. But what really enrages him is that affluent Chinese should be suckered into America's inferior way of life. It is easy to understand why a struggling average guy loathes the privileged rich, with their families ensconced in other countries. These other countries might find themselves the targets of Chinese public anger too.

Like many countries, New Zealand benefits enormously from Chinese immigration, culturally, demographically and economically. Long may it continue. Compassionate grounds aside, immigration is a pragmatic policy. In the worldwide competition for talent it makes sense to invite accomplished individuals (and their kin) because they are young, qualified, skilled or industrious. Chinese cities themselves apply such requirements for new hukou residence permits. But IVs narrowly target only a single criterion — money — and thereby risk a reputational backlash. Offshore havens are seldom popular (think 'gnomes of Zurich') so IVs must be legitimate to the public both abroad and in China. We need stringent scrutiny of IV programs to allow only 'honest money.' When targeting businesspeople, governments should act commercially. The bar must be set high to ensure investments are meaningful and generate local jobs. 

Photo by Flickr user Suuuuummer.

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