by He Huifeng in SCMP, Apr 13, 2023
Last year was a tipping point for a number of wealthy Chinese individuals such as Billy Huang, who runs an investment conglomerate in southern China.

The Ukraine war, Western sanctions on Russian business, and spiralling US-China relations have pushed Huang to hold off on his overseas expansion plans for this year. He is also taking a cautious outlook on the domestic market in the near future, even though China has reopened its borders.

“I have consulted more than 100 professionals, asking what is worth investing in over the coming years and what should be avoided if economic prospects are weak,” Huang said.

“If China-US relations continue to deteriorate and devolve into a new cold war, the money we Chinese put overseas, regardless of its whereabouts, is very likely to be put under grave risk,” Huang lamented. “Take a look at what has happened to Russian oligarchs.

“Roman Abramovich is a good lesson.”

The former owner of Chelsea, a Premier League football club in England, is among more than 1,000 Russian oligarchs and businesses sanctioned for allegedly benefiting from close relations with President Vladimir Putin, in the aftermath of Russia’s invasion of Ukraine. UK and EU governments sanctioned Abramovich in March of last year, but he has denied having financial ties to the Kremlin.

Despite the rosy reopening prospects depicted by Beijing, heightened geopolitical tensions, the US-China rivalry, bleak prospects on exports, and turbulence in global financial markets triggered by the collapse of Silicon Valley Bank have all intensified the sense of insecurity among rich Chinese such as Huang.

Based on his research, he narrowed his focus to medical care and energy, while shying away from the markets for fast-moving consumer goods and maternal and childcare resources.

“If China-US relations continue to deteriorate and devolve into a new cold war, the money we Chinese put overseas, regardless of its whereabouts, is very likely to be put under grave risk,” Huang lamented. “Take a look at what has happened to Russian oligarchs.

“Roman Abramovich is a good lesson.”

The former owner of Chelsea, a Premier League football club in England, is among more than 1,000 Russian oligarchs and businesses sanctioned for allegedly benefiting from close relations with President Vladimir Putin, in the aftermath of Russia’s invasion of Ukraine. UK and EU governments sanctioned Abramovich in March
of last year, but he has denied having financial ties to the Kremlin.

Despite the rosy reopening prospects depicted by Beijing, heightened geopolitical tensions, the US-China rivalry, bleak prospects on exports, and turbulence in global financial markets triggered by the collapse of Silicon Valley Bank have all intensified the sense of insecurity among rich Chinese such as Huang.

“Chinese businessmen used to be the group with the most optimistic outlook on the country’s economy. But not many are still optimistic for the coming three to five years under the current situation,” Huang added.

“It is going to be another money story in the cold war. I don’t have any plans to emigrate, as I need to keep my Chinese nationality to operate my main business in the country. But even if I got a green card, my overseas assets are still at risk of being frozen or sanctioned.”

According to a survey of high-net-worth individuals (HNWIs) in China, released last month by wealth and investment consultancy Hurun, around 70 per cent of high-net-worth Chinese plan to increase their domestic investments in the coming three years.

The China HNWIs Quality of Life Report 2023 also found that, in terms of where to invest abroad over the coming three years, 23 per cent of respondents said Hong Kong, 14 per cent said Singapore, and 11 per cent said Tokyo.

Annie Chung, a Hong Kong-based senior insurance sales agent whose clients are wealthy Chinese, pointed to a trend of fund inflows to the city due to risk aversion after the fallout from the Silicon Valley Bank collapse and the confidence crisis at Credit Suisse. And some fund-management and insurance companies have introduced products to attract such funds.

“There are some Chinese clients who have recently considered investing their overseas funds in Hong Kong. Some savings-style insurance policies are increasingly attractive,” Chung said. “Low exposure to geopolitical and financial crises, stability and safety – those are what they care about most.”

Rachel Huang, whose family runs an internet company in Shenzhen, just across the border from Hong Kong, is among China’s HNWIs who are hesitant to allocate more money amid risky economic conditions.

“For at least two years we will not make new investments in our own business, nor will we invest in real estate, as China’s export and demographic dividends have become a thing of the past,” she said, noting how China’s export volume could continue falling, which could drag down both the national economy and the wealth of individuals.

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“Some of my friends have seen their wealth shrink over the past year due to either market or policy impacts,” Rachel Huang added. “But my husband and I have been most interested in increasing the proportion of our disposable high-liquidity assets, such as deposits, insurance and gold.”

The Hurun report also said that bank deposits, for the first time in the past decade, have become one of the top three investments that rich Chinese plan to increase over the coming three years, after equities and gold, while real estate continues to lose its allure and now tops the list of sectors in which the group plans to reduce investments.

The report also noted how the spending of high-end consumers remains crucial to China’s economy, even though the total size of the Chinese luxury market fell by 5 per cent last year from 2021, to 1.65 trillion yuan (US$240 billion).

Belle Liang, a yacht agent in Hainan province, however, still expects business to recover this year as wealthy Chinese may become more eager to spend after the relaxation of China’s zero-Covid restrictions late last year.

“I sold six to seven small yachts priced at less than 1 million yuan each year during the pandemic, but this year I expect to sell more than five small ones and around five big yachts with unit prices above 10 million yuan,” she said.
https://www.scmp.com/economy/china-economy/article/3216827/rich-chinese-scrutinise-investments-never-overseas-funds-seen-grave-risk?module=lead_hero_story&pgtype=homepag