Last month saw Xi Jinping elected as general secretary of the Communist Party of China, a political position that comes with a ten-year term and, to all effect, the presidency (which he takes up in March).
Aside from the challenges posed by the fluctuating fortunes of global economics, paired up alongside the task of ensuring that high levels of growth are maintained throughout his tenure, Mr Xi now faces a new test – incentivising wealthy residents to keep their capital in the country.
According to the 2012 Annual Report on Chinese International Migration, more and more of China’s wealthy elite are engaging in what is described as “investment immigration projects”.
Over half of these, which are valued at $500,000 (approximately £308,267), are earmarked for the US, which is no surprise given that at a government level, officials from the two powerful economies are currently meeting to discuss new trade agreements.
The report, which was commissioned by the Centre for China and Globalisation and the Beijing Institute of Technology, found that this demographic is comprised of self-employed individuals and senior corporate managers aged between 35 and 55.
It is not just the huge amounts of Chinese capital that is heading overseas. The report also found that high net worth individuals are increasingly looking to move abroad.
The US, Canada and Australia have proved to be two particularly popular destinations. Last year alone saw more than 87,000 permanent visas granted to Chinese international movers in America, while between 2008 and 2011, more than 150,000 people from China relocated to the South Pacific country – 60 per cent of the total foreigners who have been accepted into the country.
Though many Chinese investors will still maintain a foothold in their native country – it is, of course, lucrative to do so – that there are so many individuals interested in redirecting their wealth overseas is nevertheless significant. Indeed, foreign direct investment is vital in supporting other countries grow or at least be more sustainable.
“The private economy contributes more than 60 per cent of China’s GDP and it absorbs a majority of employees,” Wang Huiyao, director of the Centre for China and Globalisation was quoted by China Daily as saying. “So if private business owners emigrate with their capital, it would mean less investment in the domestic market, so fewer jobs would be created.”
“Over the medium term we think that China’s economy faces a number of challenges in key areas that policymakers have to deal with,” Helen Zhu, chief China equity strategist in Goldman Sachs’ global investment research department, said earlier this year:
“The first is rebalancing growth away from investment, away from export and more towards domestic consumption. The second one would be to gradually phase out non-market driven measures that the government has put in place.”