What is luring China's wealthy to invest in Australia - and what does it mean for the national economy?
Nine out of 10 applicants for the new special investment visas are Chinese
The Australian special investor visa program is gaining steam after a slow start in 2012. Analysts say 65, mostly Chinese, millionaires have brought over $440 million into the country so far.
The scheme - auspiciously dubbed sub-class 188 – fast tracks visas for those ready to invest over five million dollars into Australia. This is a whopping 26.5 million yuan. The cash needs to go into state government bonds, specific infrastructure and property investments. So far it’s mostly filled Victoria and NSW coffers.
After four years on a residency visa investors can add another lucky eight, convert to a subclass 888 visa and get an Australian passport. By the end of 2013, 601 people had applied and 65 visas had been granted according to the Australian Department of Immigration and Border Protection.
Comparatively, the US special entry scheme asks foreigners to invest a minimum of $500,000 USD and the soon to be scrapped Canadian scheme has been asking Chinese investors to lend local governments $750,000 Canadian dollars.
Smog and schools lure Chinese private investors
Wealthy Chinese - after retirement houses, top schools and cleaner air - began looking over the seas to Australia after Canada started scaling back it’s investment visa program in 2012. The Australian Financial Review reported a pilot program, set up by the Bank of China to test looser foreign exchange, is reportedly how much of this money is landing on Australian soil.
Apart from piles of paperwork there are few barriers, there’s no language requirement (indeed just a small fine for a lack of functional English), no upper age limit and you do not have to set up a business in Australia. With a criminal record check, and a stamp of approval from the state government, the passport path is yours.
According to one analysis from investment firm Korda Mentha, $440 million has been brought in by the scheme so far. The real estate investment firm, Macquarie Group and Moelis Australia have also set up funds and consultancies to help red elites find suitable parking spots for their millions.
More ordinary Chinese people are online shopping for real estate in Australia
Australian real estate company REA, which owns realestate.com.au, launched a new Chinese site to “facilitate property transactions” in January. The site already lists 46,000 properties, a figure it expects to ramp up when it expands in April.
Henry Ruiz,Chief Product Officer at REA Group said “We know that Chinese consumers have an enormous interest in property in Australia". Hot suburbs pop out from the map on the main site with well know local universities and schools listed alongside them.
This comes after Australian expats and former REA group employees Andrew Taylor and Simon Henry set up a similar site in China in 2011, juwai.com, also to cater to mainland buyers. The site claims to list over 2.2 million properties in a long list of countries including Australia.
Other Chinese sites such as ausproperty.cn and fangau.com specifically cater to the peaking interest in Australian real estate investment by individuals, as opposed to the Chinese state owned enterprises Australian state governments have made deals with in the past.
While there are a number of rules over investment in Australian property, this has not stopped Sydney and Melbourne house prices souring in suburbs that appeal to Chinese investors. Australian Property Monitors said property sales in Sydney spiked by 15% in 2013 alone. The past 12 months have seen Melbourne house prices jump by 11 percent and Sydney rise by 13 per cent.
The US is the top destination for China’s wealthy as Canada shuts the door on 46,000 in waiting list
The United States is still the favorite destination for wealthy Chinese. In 2012, 82,000 individuals born in China were granted permanent resident status by the U.S. While 7641 grabbed a green card though the Eb-5 scheme in 2012, many were also granted entry for other reasons.
In Europe, much to the chagrin of the EU, Portugal offers a similar deal for €500,000 ($763,428 AUD). In Greece just €250,000 ($381,714 AUD) in real estate investment can score a five-year residency permit.
Canada will formally shut down its immigrant investor program in the 2014 budget. The scheme has seen more than 130,000 people come to Canada since it began in 1986. Most of the applicants were from China, Taiwan and South Korea. Of the 46,000 currently on the waiting list, 70 per cent were from China.
The scheme, which had no language requirement, was haunted by doubts Canada was collecting enough tax on investment migrants compared to those who came in on skilled migration schemes.
Chinese Investors are not the fastest growing number of migrants to Australia
Brits and New Zealanders still dominate the immigration pie. 20 per cent of immigration to Australia is from the UK while New Zealanders take up 9.1 per cent. Immigrants from China represent one of the fastest growing groups but they are a mere six per cent of the total.
Australian Bureau of Statistics show the proportion of Australian immigrants born in Asia crept up slowly from 24 per cent in 2001 to 33 per cent in 2011.
For socialist China, this is elite capital flight on a huge scale
The latest report from research firm Hurun found almost two-thirds of Chinese with more than 10 million yuan in the bank have emigrated, or are making plans to. Wealthy Chinese moved 2.8 trillion yuan worth of assets offshore in 2011 according to a report from the Chinese think tank Center for China and Globalization. This was about three percent of the country’s GDP for that year.
What’s more, many government officials have foreign passports. A report from the International Consortium for Investigative Journalists revealed relatives of Chinese leaders – including the brother-in-law of China's current president, Xi Jinping - hold vast sums in offshore accounts in the British Virgin Islands.
At the same time stocks, property and royalties especially for high net worth individuals are hard to track and therefore, hard to tax. Fake receipts are manufactured and sold online to low paid public servants to capitalize on reimbursements. In 2010, for example, authorities said they caught 74,833 companies filing false invoices with the government.