Boom, boom: China just keeps on giving

The family members of China’s political elite are stashing huge amounts of cash in offshore accounts, according to a two-year financial reporting project by the International Consortium of Journalists released this week (Chinese leaders linked to secret offshore haven, 22 January).

Among those implicated in the leak  are the brother in-law of president Xi Jinping, the son and son-in-law of former premier Wen Jiabao, a cousin of former president Hu Jintao and the son-in-law of China’s late “paramount leader” Deng Xiaoping. 

According to estimates reported by ICIJ, between $US1 trillion and $US4 trillion in untraced assets have left China since 2000.

Chairman Mao must be turning in his mausoleum.

As the West races to invest in China, Chinese princelings are racing in the opposite direction. It’s not just money that is leaving either, it's people too. A new report conducted by the Hurun Research Institute said that 64 per cent of China’s millionaires have either already emigrated with their wealth or are making plans to do so.

Nor is it just the mega-rich who are cashing in their chips. Research produced by Hong Kong-based brokerage CLSA shows that 15 per cent of middle class Chinese were looking to emigrate. According to CLSA’s Aaron Fischer, the desire to get out of the country rises dramatically the richer people become.

“As income levels rise to above 120,000 RMB per year, 45 per cent of people said that they’re looking to emigrate – which is a very high number ” he said in a briefing this week.

And where do the newly rich Chinese want to go? In the top spot is Canada, with Australia not far behind. A report released this week by the Center for China & Globalization on Chinese migration trends revealed that the number of emigrants from China to the United States, Canada, Australia and New Zealand, reached 148,034 in 2012. Thanks to significant investor-visa programmes, as they leave the country they’re taking their money with them. In 2012, 6,124 Chinese people moved to the US by investing there.

As Bob Gottliebsen points out, wealthy Chinese have long sought to have assets abroad as an insurance policy in case things go belly up on the mainland (Sydney's property dam is about to burst 21 January). Yesterday’s leak shows how even those at the very pinnacle of power in China lack faith in the durability of China’s economic and political system.

One positive take away from all this is that we probably don’t have to worry about the flow of Chinese tourists petering out. Newly released data from the Australian Bureau of Statistics showed that Chinese tourist arrivals were down in November compared to the previous year. It’s likely that this was just a blip in a narrative of otherwise explosive growth. And as long as China’s rich intend on emigrating, they’re going to try before they buy.

CLSA predicts Chinese outbound tourist numbers will reach 200 million by 2020 and their overall spend will triple (Outbound Chinese tourists to reach 200 million by 2020: CLSA 21 January). This follows a Boston Consulting Group report that says the number of Chinese travelers to Australia and New Zealand will soar from 910,000 trips in 2012 to 2.2 million in just six years (Chinese visitors set to soar: BCG 11 December).

This will result in, as the report puts it, the equivalent of a “resources boom” for the tourism and hospitality industries.

Sure, an influx of wealthy Chinese will likely further push up house prices but it will also ensure Australia remains a dream holiday destination for China's newly rich, as they tend to follow in the footsteps of other wealthy pioneers.

In this respect Australia is really punching above its weight. Just last week we knocked France out of the top slot for "Best International Luxury Destination" in the 2014 Hurun Report Chinese Luxury Consumer Survey. Australia is 10^th on the list of countries Chinese people would go to if money were no object according to CLSA.

This is only the beginning of the story. CLSA’s research indicates that when China’s neighbours hit a per capita GDP of $US8,000 dollars, outbound tourism numbers jumped up exponentially.  At the moment, only 10 Chinese provinces are at this point. In six years time it will be 27 provinces.

As with the resources boom, the reality is we probably don’t have to do much to continue to enjoy the benefits of China’s booming outbound-tourism market. The drivers behind the boom are not going away any time soon. Incomes are still going to go up. China’s heavily polluted environment is likely to get worse before it gets better. And with a miserably low amount of annual leave – most people in China are only entitled to five days off – it’s to Australia’s advantage that we’re the shortest long-haul flight out of there.

If China’s economy continues to grow, they will come. And if things go wrong, they will still come. Australia is likely to remain a highly desirable destination for a very long time.  

We really are the lucky country.