Douglas Todd: Why China’s woes matter to Canada

While China’s numbers have largely recovered to pre-pandemic levels, they have declined as a share of total immigration, compared to India in particular. And not convinced that attracting the “ultra-rich” will benefit Canada and Canadians (part from Realtors, luxury car dealerships etc):

China is in turmoil.

The once-roaring housing market of the world’s second-largest economy is collapsing.The regime’s harsh zero-COVID restrictions are causing bitterness and anger.

Beijing’s stepped-up quest for “common prosperity” has many worried their savings and assets aren’t being treated as actually theirs — and could be confiscated by Communist party rulers in the name of equality.

More people, especially the rich, want to escape.

In the past 30 years, Canada has been one of the top destinations for people from China seeking a financial haven and more stable lifestyle. China has long been Canada’s second-largest source country, after India, for new immigrants.

And the country’s recent outbreaks of both financial and social chaos are igniting more desire to get out. A global investment migration consultancy, Henley & Partners, estimates 10,000 to 13,000 ultra-wealthy residents of China are seeking to pull $48 billion out of the country this year.

Canada is a big draw. The Migration Policy Institute found two years ago that Canada was the third most-popular choice for Mainland’s China’s migrants. That was before this summer, when China’s real-estate sales dived by 59 per cent compared to 12 months earlier.

Now, the 2022 Hurun Report, which surveys the desires of high-net-worth Chinese, has found their No. 1 choice for a country to move to is Canada.

But there’s a problem. The people of China, population 1.4 billion, face increasingly strict homegrown barriers to starting a new life abroad.

The Hurun Report, which each year measures the desires of rich people from China, found that this year that Canada had risen to become their No. 1 destination for immigration. (Source: 2022 Hurun Report)
The Hurun Report, which each year measures the desires of rich people from China, found that this year that Canada had risen to become their No. 1 destination for immigration. (Source: 2022 Hurun Report)

That’s even while there is an emerging term for the exit-minded phenomenon in China — “run-ology.” It’s used widely online to capture both the desire to leave the country and tips on how to do it.

While many Chinese are no doubt happy to stay in their country of birth, many are seeking another shore because of intense frustration over the country’s COVID-19 restrictions.

And that’s not all. A deeply felt mistrust of Chinese leaders came to the fore his month when video emerged of tanks blocking the entrances to some banks in China, ostensibly to stop people from withdrawing their money.

While debate ensued between official Chinese media and Western news outlets over the exact purpose of the tanks, few disputed that China’s police have crushed mass demonstrations after depositors’ funds were frozen as banks have been investigated for fraud.

The backdrop to the bank-savings anxiety has been President Xi Jinping’s stepped-up efforts to develop a patriotic “common prosperity.” It’s already lead him to crack down hard on, among others, the country’s more than 600 billionaires.

One of many notorious cases centres on billionaire Xiao Jianhua, a Canadian passport holder who disappeared after being abducted in Hong Kong five years ago. He is now apparently facing a secret trial in China

China doesn’t recognize that Canada has any diplomatic influence in regard to Xiao. Even though Xiao gave up his Chinese passport because China does not allow dual citizenship, China is still treating him, roughly, as one of its own.

In a related move, Beijing has announced strict 2022 curbs on all “non-essential” overseas travel, purportedly because of COVID. In the face of a spike in outbound trips, leaders have cut the number of travel passports and visas it will issue to a fraction of previous levels.

It’s also harder to get money out of the country.Canadian legal specialist David Lesperance, who specializes in migration for the rich, says he’s receiving three times as many requests from China that he had last year. And Jenga, a firm that handles international money transfers, reports it has seen demand from China double in 12 months.

That’s especially worrying for China in light of its troubled economy. The mammoth speculative bubble that was China’s real estate market, which accounts for an incredible 30 per cent of the nation’s GDP, has been bursting.

China’s Evergrande, the world’s most indebted real-estate developer, is on the verge of bankruptcy. Construction on its new residential towers has halted. China’s housing crisis has wiped a trillion dollars off the value of the sector.

The U.S. Federal Reserve has expressed concern the dramatic downturn in China’s housing market will spillover into Western economies, as many Chinese citizens’ debt grows and an economically weakened China is forced to retrench. The vacancy rate in major Chinese cities is now 15 to 35 per cent, according to the journal Foreign Policy.

Many Chinese nationals who have held onto their assets and wealth are looking elsewhere to invest, even as their leaders make it a challenge. China is talking tougher about enforcing its foreign exchange controls, which allows citizens to send offshore only US$50,000 a year.

But Canadian mortgage broker Ron Butler is among those who share the “growing belief that more capital from China will flow out to other countries’ real estate.”

Yes, we are hearing capital controls are running hot in China. But we know that a workaround is always found and tightness eventually slackens.”

In addition, people from China who obtain foreign residency or citizenship can move money out of their country more easily. Immigration lawyers and consultants say that’s a prime reason for the attractiveness of Canada, which already has 1.8 million people of Chinese ancestry, about half of whom are from China, mostly living in greater Toronto and Metro Vancouver.

Ottawa has long generally welcomed outside money, which typically goes into real estate rather than other businesses. B.C., through its foreign-buyers tax, beneficial ownership registry and speculation tax, is now one of the only provinces trying to monitor such offshore wealth.

Last year, Canada approved 31,005 individuals from the People’s Republic of China as permanent residents. While by no means are all well-off enough to immediately buy a dwelling, that was a jump from 16,525 migrants in the pandemic year of 2020. It was similar to 2019. The pace of immigration from China in the first half of 2022 appears more rapid than ever.

Meanwhile, others from China who want to put money into Canadian real estate, but don’t want to give up their Chinese citizenship, have been opting for Canada’s popular 10-year multiple-entry visas, which permits them to live here six months at a time. Although the Immigration Department didn’t provide the latest figures, Canada had previously issued more than three million 10-year visas to Chinese nationals.

Whichever way you look at it, recent developments confirm that what happens in China matters to Canada.

Source: Douglas Todd: Why China’s woes matter to Canada

About Andrew
Andrew blogs and tweets public policy issues, particularly the relationship between the political and bureaucratic levels, citizenship and multiculturalism. His latest book, Policy Arrogance or Innocent Bias, recounts his experience as a senior public servant in this area.

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