China is witnessing a large-scale departure of its affluent citizens, who are looking for better opportunities and lifestyles abroad. A report by Henley and Partners, an investment migration consultancy, estimates that China will lose 13,500 high-net-worth individuals (HNWI) in 2023, up from 10,800 in 2022. This is the highest net loss of millionaires in the world, and part of a long-term trend.

The report identifies several factors that are pushing China’s wealthy to seek alternative residences, such as:

• The harsh COVID-19 measures that have restricted travel and social life for Chinese people. China has adopted a zero-tolerance strategy to the virus, imposing lockdowns, mass testing, and quarantine measures whenever new cases emerge. While this has helped to control the virus, it has also affected the well-being and happiness of many people.
• The regulatory clampdowns on various sectors, such as technology, education, entertainment, and real estate. The Chinese government has been tightening its control over the private sector, imposing fines, suspensions, and investigations on some of the biggest companies and celebrities in the country. The goal is to curb monopolistic practices, promote social values, and redistribute wealth. However, this has also created uncertainty and fear for many entrepreneurs and investors, who worry about losing their wealth and freedom.
• The slowing economic growth and the weakening currency. China’s economy has been losing momentum after a strong recovery from the pandemic in 2020. The growth rate of GDP fell from 18.3% in the first quarter of 2023 to 7.9% in the second quarter. The yuan has also depreciated against the US dollar, making overseas assets more appealing.

Where are these millionaires going? The report lists some of the most popular destinations for Chinese HNWI, such as:

• Australia, which is expected to gain 5,200 millionaires in 2023, up from 3,800 in 2022. Australia offers a high quality of life, a stable political system, a strong education system, and a favorable climate. It also has a relatively low COVID-19 caseload and a comprehensive vaccination program.
• The United Arab Emirates, which is expected to gain 4,500 millionaires in 2023, up from 3,000 in 2022. The UAE offers a tax-free environment, a diversified economy, a strategic location, and a cosmopolitan culture. It also has a high vaccination rate and a low COVID-19 mortality rate.
• Singapore, which is expected to gain 3,200 millionaires in 2023, up from 2,500 in 2022. Singapore offers a business-friendly environment, a robust financial sector, a world-class healthcare system, and a multicultural society. It also has a low COVID-19 infection rate and a high vaccination rate.

What are the consequences of this trend? The report warns that the outflow of millionaires could have negative impacts for China’s economy and society, such as:

• The loss of talent, innovation, and entrepreneurship. Many of the millionaires who are leaving China are the ones who have driven the country’s economic development and technological progress. Their exit could reduce the human capital and creative potential in China, and result in a brain drain effect.
• The loss of tax revenue, consumption, and investment. The millionaires who are leaving China are also the ones who pay a large share of taxes, consume a lot of goods and services, and invest in various sectors. Their exit could reduce the fiscal income and the domestic demand in China, and result in a capital flight effect.
• The loss of social stability, harmony, and cohesion. The millionaires who are leaving China are also the ones who have a stake in the country’s future and a sense of belonging to the nation. Their exit could erode the social fabric and the national identity in China, and result in a trust deficit effect.

How can China stop this trend? The report suggests that China needs to take some measures to retain and attract its wealthy elite, such as:

• Relaxing its COVID-19 policies and allowing more freedom of movement and social interaction. China could learn from other countries that have balanced the health and economic aspects of the pandemic, and adopt a more flexible and pragmatic approach to the virus.
• Easing its regulatory pressures and providing more incentives and support for the private sector. China could acknowledge the value and contribution of the private sector, and adopt a more transparent and consistent regulatory framework that fosters innovation and competition.
• Boosting its economic growth and strengthening its currency. China could implement more stimulus measures and structural reforms to revive its economy and enhance its productivity and efficiency. It could also adopt a more market-oriented exchange rate policy that reflects the fundamentals of its economy.

The report concludes that China has the potential to stop the trend of millionaire migration, if it can address the concerns and aspirations of its wealthy elite. It also notes that China is not the only country facing this challenge, as other emerging markets such as India, Brazil, and Turkey are also experiencing similar outflows of millionaires. The report calls for a global dialogue and cooperation on the issue of wealth migration, as it affects the economic and social development of both the sending and receiving countries.