China is in the process of aggressively and rapidly expanding its hegemony around the world and it is building up its military might. However, the biggest risk posed by this superpower lies in the financial sphere and it is resulting in people and capital leaving the country at unprecedented levels.
China is embroiled in dangerous geopolitical adventures in the South China Sea,
making grandiose territorial claims and building artificial islands. It reaches into other countries to silence
critics, is becoming more repressive and remains an authoritarian one-party
state. It suffers from high levels of pollution and corruption. These
tendencies are making many wealthy Chinese anxious and looking for a way out.
China is already the largest source
of regular emigrants in the world, with more than half-a-million
Chinese immigrants settling in the OECD bloc in 2013 and millions more are
waiting their turn. China is also the largest source of
investor-class emigrants and as pointed out previously, in many host
countries Chinese make up close to 80% CBI applicants.
10%
of China’s billionaires have already
emigrated and more than half of its 1.3
million millionaires plan to leave of the country in the next five years -
that is about 650,000 or about 130,000 per year until 2020. Whether they will
succeed is anybody’s guess, since only 9,000 managed to leave last year.
China is experiencing large capital and
migrant outflows - between US$450 billion and US$1.2
trillion of capital left China last year, often in the suitcases the millions
of Chinese emigrants and tourists. Chinese emigrants are allowed $50,000 per
year, but this is not well-enforced and desperate Chinese emigrants simply
smuggle their cash across borders. For example, border guards at the Vancouver
airport seized $13-million in hidden currency over the past two years, that is
in addition to the $323-million of declared currency (over $10,000) by Chinese tourists.
Apart
from capital outflows, China has $28
trillion in outstanding loans. Its credit-to-GDP gap is now three times over the danger threshold and much higher than the US
subprime bubble. Its total credit of 255% of GDP
poses a risk of a full-blown banking and systemic financial
crisis, with obvious consequences
for migration flows: The hypothesis is this: the
greater the economic risk, the faster Chinese money and emigrants move offshore.
The faster they move offshore, the greater the fear that stricter capital
controls will be implemented - Which in turn could speed up the exodus in a pre-emptive
effort to avoid the clampdown – once the clampdown occurs, there will be a
dramatic slowdown of both people and capital.
