Wealthy Chinese transfer money to Singapore amid common prosperity
As Beijing pushes for “common prosperity” and political unrest threatens Hong Kong, Singapore has become a haven for some of the region’s wealthiest tycoons and their families.
Wei Leng Tay | Bloomberg | Getty Images
More and more wealthy Chinese fear keeping their money on the mainland and some see Singapore as a safe haven.
Since protests disrupted Hong Kong’s economy in 2019, well-to-do Chinese have sought alternative places to store their wealth. Singapore has proven attractive due to its large Mandarin Chinese-speaking community and, unlike many countries, it has no wealth tax.
The trend seemed to pick up speed last year after Beijing’s sudden crackdown on the education sector and its emphasis on “common prosperity” – moderate wealth for all, rather than the few.
That’s according to CNBC’s interviews with companies in Singapore that help wealthy Chinese move their assets to the city-state through the family office structure.
A family office is a private company that handles the investments and wealth management of a wealthy family. In Singapore, setting up a family office typically requires at least $5 million in assets.
Over the past 12 months, inquiries about setting up a family office in Singapore have doubled at Jenga, a five-year-old accounting and business services firm, according to its founder Iris Xu. She said the majority of inquiries came from people in China or emigrants from the country.
About 50 of his clients have opened family offices in Singapore — each with at least $10 million in assets, Xu said.
China’s rapid economic growth has created hundreds of billionaires in just a few decades. Many more joined their ranks last year, according to Forbes.
That brought the total number of billionaires in China to 626, just behind the 724 billionaires in the United States, according to the data.
Xu said his Chinese clients “believe there are many opportunities to make a fortune in China, but they don’t know if it’s safe for them to deposit money there,” according to a CNBC translation of the article. interview in Mandarin.
Concerns about “common prosperity”
New family office-related work comes disproportionately from Chinese clients, said Ryan Lin, director of Bayfront Law in Singapore. His firm also has clients in India, Indonesia and parts of Europe.
Although capital controls mean many Chinese clients open family offices with smaller capital, Lin said most own income-generating businesses outside the mainland.
The family office as a means of immigration
Covid-related restrictions on international travel have also accelerated wealthy Chinese interest in establishing family offices in Singapore, Xu said. The country has a Global Investor Program that allows adults who invest at least S$2.5 million ($1.8 million) to apply for permanent residency.
Since the start of the pandemic, some Chinese citizens have discovered that the Chinese government may suspend passport issuance and renewal services for virus control reasons.
In response to an online question in August about the passport suspension, China’s National Immigration Administration said it would only issue such documents to people with essential or urgent reasons to leave the country.
The boom of family offices in Singapore
Many billionaires around the world have used family offices to manage their wealth. Another part of Singapore’s appeal is that its location offers investors proximity to other investment opportunities in Asia.
Since late 2020, Bridgewater founder Ray Dalio and Google co-founder Sergey Brin have opened family offices in Singapore to take advantage of its favorable tax policy, according to Bloomberg reports.
How long can it last?
The ongoing war between Russia and Ukraine has created uncertainty among Chinese citizens who wish to open family offices in Singapore.
China has said it opposes the sanctions. Beijing has also refused to label Russia’s attack on Ukraine an invasion, and state media often blame the United States for the conflict.
Contrary to China’s attempt to take a neutral stance on the war, Singapore joined the US and the EU in imposing sanctions on Russia earlier this month, freezing local bank accounts held by sanctioned Russian individuals and entities.
Jenga’s Xu said news of the asset freeze had given some potential Chinese clients pause in their plans to open a family office in Singapore.