China sees outbound flow of funds increase by 1,500% in a decade

Posted On Tuesday, 15 March 2016 14:00 Published by
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China has seen an increase in outward investment by almost 1,500%* in a decade (2005 - 2015) according to the Knight Frank Wealth Report, 2016. 

Nadine_Goldfoot_Fragomen_Worldwide

The surge, fuelled by a number of key economic and policy factors reflects the growth from the wider Asian region with outward investment increasing in Indonesia (2569%), Thailand (1054%) and South Korea (600%).

Taking the latest IMF data to draw together a comprehensive picture of capital movements, Knight Frank has analysed the ten-year shift in global wealth movements.

Liam Bailey, global head of research, Knight Frank says. “Unsurprisingly, the general trend over the past decade has been for significant growth in cross-border investment, led by massive growth in outflows from China and in absolute terms, if not rate of growth, from the US.”

Knight Frank has analysed 'inward investment' flows which represent the liabilities that are claims on local assets by foreign residents and 'outbound investment' flows - assets that are claims of a local resident on an asset located in a foreign country.

Greece (135%) and Italy (106%) have witnessed relatively strong outbound investment flows in a European context due to economic instability.

Looking at inward investment, again China has seen notable growth (500%) alongside other emerging markets, such as Brazil (294%). Asian markets, which have seen strong interest from regional property investors, have seen concomitant growth - notably Singapore (285%), Hong Kong (222%) and Australia (146%).

The impact of economic instability has resulted in an 18% decline in inward investment in Greece over the ten-year period.

Barriers to Wealth Migration

As the rate of wealth movements has grown, governments have started to take an ever-closer interest, meaning national and international regulation could temper global capital and investment flows.

Nadine Goldfoot, partner, Fragomen Worldwide says, “We know the world’s population of high-net-worth individuals is increasing, particularly in the emerging markets and those high-net-worth individuals are using mobility as a means to safeguard themselves against instability.

The response to this demand is two opposing trends running simultaneously in the supply of investor migration models. On the one hand there is considerable competition to attract these individuals resulting in more favourable eligibility requirements for applicants from some countries e.g. Malta and Portugal. At the same time, countries that traditionally attract high-net-worth individuals are making their programmes tougher or in some cases abandoning them all together. “

According to Fragomen Worldwide, the following are the largest barriers to future wealth movement:

Migration Implications: St Kitts and Nevis has already suspended and Antigua and Barbuda is 'actively' considering excluding, Syrian nationals from its Citizenship by Investment Programme.

Restrictions and Closures of Popular Investor Migration Models: In November 2014 the UK doubled the minimum threshold for its popular Tier 1 Investor programme to £2m and introduced additional compliance requirements. Two popular programmes, Hong Kong's Capital Investment Entrant Scheme and Canada's Federal Investor Programme, were closed in 2014/2015.

Changes to Residency in Switzerland: The requirements of the lump-sum form of taxation regime were recently tightened, while the French government announced that Swiss residents who are taxed under the lump-sum regime will no longer benefit from the provisions of the Swiss-French double-tax treaty.

International Restrictions Impacting Top Sending Countries: In 2014, Russia introduced a legal requirement for its citizens to notify the authorities if they obtain alternative permanent residency or citizenship. China has imposed limits on withdrawals outside of China which in effect, applies to virtually all card transactions.

Schengen restrictions and developments in the EU: Recent months have seen border controls being re-introduced across parts of the EU in response to the refugee crisis.

Opportunities for Movement

Caribbean Opportunities Increasing: St Lucia's first citizenship by investment programme was announced in late 2015.

Malta's Individual Investor Programme: Interest in this programme remains high. Malta is also introducing a Residency by Investment Programme.

Australia Introduces the Premium Investor Visa: Introduced in July 2015, the Premium Investor Visa allows investors to fast track to permanent residence in Australia for those holding a complying investment of at least AU$15m for 12 months.

Portugal Increases Golden Residence Permit Investment Options: Four additional options have been introduced to encourage investment into science, cultural heritage and urban rehabilitation and incentivise applicants to invest in areas of low density and lower than average GDP.

Last modified on Tuesday, 15 March 2016 15:53

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