Gu Suhua writes from Beijing: There is panic in the streets in Beijing and Shanghai. No, not because of an impending epidemic but due to the rich fearing they might lose their luxury apartments. Such is the alarm caused by Xi Jinping’s promise to curb corruption that luxurious properties are going for a song. However, only cash buyers need apply. No one has ever lived in these apartments. They were bought as an investment by entrepreneurial officials with their hand in the till. Who, you may wonder, would want to buy them? Other officials who have better protection at the top?
There is no information available on whether Wen Jiabao’s family has divested itself of any desirable residences. You may remember that the Prime Minister’s family is worth an estimated $2.7 billion. Some unkind official leaked this to the American press in November.
The problem then arises of what to do with the new mountain of cash generated by these fire sales. Well, the good news is that foreign countries are falling over themselves to attract Chinese cash. Hungary, for instance, will grant temporary residence to anyone who buys a property worth at least 160,000 euros. Spain caps that by asking for 300,000 euros with the prospect of permanent residency and eventually a Spanish passport. Budapest and Madrid, by the way, say that an apartment makes it easier to set up a business to trade in the European Union. Still it is hard to believe that someone with only a few hundred thousand euros is going to found a company to make money there. Or perhaps, I’ve forgotten that a Chinese company to help fellow compatriots buy property could be a winner.
This shows how desperate Hungary and Spain are to get their hands on some Chinese cash. Perhaps Madrid could offer Spanish passports for a mere million or two euros. Think what this would do for its economy if a million or two well-heeled Chinese took up the offer: billions even trillions would flow into the Ministry of Finance. Given that youth unemployment in Spain is now over 60 per cent, Prime Minister Mariano Rajoy should get on the next plane to Beijing and offer something irresistible: Spanish passports. After all they would allow the Chinese to travel anywhere they liked in the European Union and many other countries as well. I’m sure members of the Chinese intelligence community would bite their hands off to get such a prize product.
Now is the time to attract high net worth individuals. Last year about 150,000 rich Chinese moved their assets and themselves permanently abroad. The most desirable destinations were the United States, Canada, Australia and New Zealand. The Bank of China, in 2011, estimated that 14 per cent of rich Chinese had either emigrated or were considering emigrating. In addition, 46 per cent were mulling over the idea of permanently moving overseas through various investor programmes, with property, foreign currency deposits, and stocks and shares being the main areas of investment. Over 61 per cent of applicants for permanent residency in the US, under the investor immigration programme, were Chinese. In Australia it was 61 per cent.
A lot of illicit money is leaving China. About $420 billion left the Middle Kingdom in 2010. In the decade to 2010, it came to the mind boggling figure of $2.7 trillion.
So the message is loud and clear. Cash strapped EU members have found a new source of wealth. Invite the Chinese to bring themselves and their money with them. There is just one problem. So much money is being stolen in the Middle Kingdom that the Chinese could buy up half of Spain. What are the odds that in ten years’ time, the Spanish Minister of Finance will be Chinese?