Opportunities for reform brought by wealthy immigrants from China

Opportunities for reform brought by immigrants from wealthy Chinese immigrants Glen Waverley, located 20 kilometers southeast of Melbourne, is one of the most famous wealthy areas in the area. …

Glen Waverley, located 20 kilometers southeast of Melbourne, is one of the most famous wealthy areas in the area. There are many hilltop mansions with golf courses and private gardens. Due to the higher terrain, the owners can overlook the surroundings and enjoy the beautiful scenery of Mo City when they step out of their homes. In 2011, a total of 72 luxury villas were sold in Glen Waverley, one of which was owned by Mr. Xu, the 42-year-old chairman of a Chinese chemical group. Mr. Xu bought the chemical factory where he was the director at a low price during the state-owned assets reform in the 1990s. After several years of development, the company's profits increased rapidly, and he became one of the richest people. When talking about why he accumulated hundreds of millions of net worth in a short period of time, in addition to hard work, Mr. Xu made no secret of the opportunity for reform.

However, why did Mr. Xu, who benefited from the reform and lived prosperously in the fastest-growing country in the world, spend huge sums of money to immigrate to Australia with his family?

"I have no education myself and want my children to receive a better education," Mr. Xu said in an interview with the author in China in August this year. Now his daughter is attending a private high school in Melbourne, and his wife has also gone abroad to study with her. "Send them out first, and after two years of hard work, I will sell the company and go to Australia for retirement."

Five years ago, when Mr. Xu began to go to North America and Europe to inspect the investment immigration environment, China's richest people were not yet applying for immigration as quickly as they are now. But now, Mr. Xu said that almost all his boss friends are sending their children abroad in various ways. "In the past, when we had dinner with government officials, we had to flatter and say nice things about the government. Now even the civil servants are scolding the government at the dinner party. Do you think there is hope for this country?"

Another Mr. Yao, who is also an investment immigrant, said even more. Specifically: "Everything we eat now is feared to be poisonous. We have made so much money, why don't we go abroad to buy one with peace of mind?" Mr. Yao is 40 years old. He started from scratch. In his early years, he made his first pot of gold through rural demolition. Now he is the boss of a circuit board company in Jiangsu, with a net worth of tens of millions.

How many wealthy Chinese people like Mr. Xu and Mr. Yao have applied for investment immigration? The "2012 Hurun Wealth Report" shows that China's multimillionaires have reached 1.02 million this year, including more than 60,000 billionaires. 85% of multi-millionaires and 90% of billionaires consider sending their children to study abroad. 16% of the wealthy have immigrated or are in the process of applying, and 44% are considering immigrating.

Personal wealth reports released by institutions such as Hurun, China Merchants Bank and Bain all define China's rich as people with personal assets of more than 10 million. It is worth mentioning that those with the ability to apply for investment immigration are not limited to billionaires. But this group has a greater impact on the country's politics, economy, and society.

Why do Chinese rich people want to immigrate? Through more than 2,600 surveys and more than 100 interviews, Hurun found that the three most important factors affecting wealthy immigrants are: facilitating the education of their children, ensuring wealth security, and preparing for future retirement. In addition, the medical system, environmental quality, food safety, and freedom of entry and exit are also reasons why wealthy people choose to leave. Of course, there are also some obscure reasons that the rich are inconvenient to mention, such as fear that sudden policy changes or intensified social conflicts will damage the interests of entrepreneurs.

It is not surprising that developed countries have become the main destinations for wealthy Chinese immigrants. The United States, Canada, and Australia account for about 80% of Chinese investment immigrants. According to the latest report released by the US Immigration Service, a total of 2,969 Chinese citizens applied for investment immigrant visas in 2011, with an average of 8 Chinese citizens submitting applications every day. Among them, 934 successfully applied, making China the country with the largest number of immigrants investing in the United States. In the same year, 2,020 Chinese investment immigrants landed in Canada, accounting for 63% of the new investment immigrants Canada attracted. In recent years, Australia's annual business immigration quota has been 3,500, and the number of applications from China has reached about 2,000.

The price of investment immigration ranges from hundreds of thousands to tens of millions of yuan depending on the destination country. In the United States, applicants need to invest US$1 million (approximately 6.23 million yuan, halved in low-employment areas) and hire 10 more Americans to work. Investment immigrants in Canada need to have at least 1.6 million Canadian dollars (approximately 10 million yuan) in a bank account and invest 800,000 Canadian dollars (approximately 5.01 million yuan) in an institution designated by the Canadian government. The principal will be returned after 5 years. In Australia, applicants need to invest 750,000 Australian dollars (approximately 5 million yuan) and are not allowed to withdraw their investment within 4 years. This amount of money may be more than the total lifetime income of a working-class family, but the rich are deeply disapproving of it. In Mr. Xu’s words, “Isn’t that just a house in the inner ring of Shanghai?”

The rich’s enthusiasm for overseas investment has spawned an immigration industry chain. It is reported that only Chinese buyers are currently injecting large sums of money into property sales in Sydney and Melbourne. Especially the properties around good school districts are often sold out before they are completed, and most of the buyers are wealthy Chinese. In addition, law firms that handle immigration matters also make a lot of money. Ms. Lin handles Chinese investment immigration matters at an immigration law firm in New Jersey, USA. She privately revealed that the cost of applying for investment immigration is only a few thousand dollars, but her law firm charges a processing fee of US$100,000 to each Chinese investment immigration applicant because of its high success rate and its ability to process green card immigration for wealthy families at once. In fact, wealthy Chinese are very happy to pay this high fee, because in their view, spending $100,000 to get a U.S. green card for their whole family is a really cost-effective deal.

The political impact of “leaving”

Currently, society’s discussion on wealthy immigrants mainly focuses on two aspects. The first is the economic impact of the loss of assets on the country. Previously, media reported that the wealth of mainland China's wealthy people flowing overseas reaches 10 billion yuan every year. The flow of a large amount of assets overseas will cause China to suffer a loss of tax revenue and consumption, affecting China's economic development. The second is to look at it from a moral perspective. Public opinion believes that as the first pot of gold mined by reform and opening up, the success of China's richest people is inseparable from the support of the state. Today, Chinese society is facing a series of problems such as "growing old before getting rich" and "ecological destruction". At this time, the wealthy choose to immigrate overseas to live a stable life. This not only reflects the absence of entrepreneurial spirit, but also reflects their lack of responsibility for the country and nation.

Although these two critical voices have their merits, looking at it from another perspective, the immigration of wealthy people means a quiet change in the relationship between businessmen and the government, which may provide an opportunity for China's political reform.

The idea of ​​promoting reform through asset flows or immigration can find extensive theoretical support in Western social sciences. American political scientist Carles Boix proposed in his book "Democracy and Redistribution" that asset flow is one of the prerequisites for promoting political reform and promoting the expansion of democracy. When all citizens have the right to vote, socially supported tax rates (i.e., what the median voter supports) are higher than under a meritocracy where only a small number of people can influence policy. The rich hate high taxes and income redistribution, so they oppose the expansion of democracy. On the one hand, asset liquidity allows the wealthy to transfer their wealth abroad, thereby reducing the reduction in their own wealth caused by tax reform. On the other hand, the government, which represents the general public opinion, knows that the rich have the ability to transfer wealth, so it is willing to appropriately reduce the intensity of redistribution to prevent excessive loss of wealth. With these two forces working together, progressive tax reform and robust democratic institutions are more likely to be achieved.

Behavioralist Alberto Hirschman discussed the importance of the choice of "leaving" to individuals. He pointed out that every citizen has two choices when facing damage to his own interests. One is to vent his dissatisfaction, and the other is to escape from the system. The former option leaves citizens within the system, requiring them to enjoy the benefits that may come from "venting their dissatisfaction" while bearing the corresponding costs. And most of the time, effectively expressing dissatisfaction requires the collective power of citizens. Instead, leaving is a personal act. Once an individual leaves the system, he is not subject to policy constraints within the system, nor does he need to bear the risk of social change.

On this basis, political scientist Devesh Kapur further pointed out that "departure", especially the departure of conservative elites, provides opportunities for political reform. Because it creates a new space, the lower class people who previously had no political voice, or the minority in the government who are willing to reform, can express their voices, which is conducive to the democratic process.

Looking at China's development in the past 30 years, the government has allowed a group of Chinese entrepreneurs to accumulate world-class wealth in a short period of time, thus winning their support for the current system. Many family businesses of large entrepreneurs or government officials have received more or less government care in terms of loans, orders, financing, etc. They have become part of interest groups and therefore have no strong will to promote reform measures such as improving the market economy and increasing property redistribution. Although some small and medium-sized entrepreneurs hope for reform, they rarely take action due to their limited strength. Therefore, there are always loud calls for reform but little movement. As early as 1993, Deng Xiaoping pointed out: "How to achieve prosperity for 1.2 billion people and how to distribute wealth after becoming wealthy are all big problems. Solving this problem is more difficult than solving the problem of development."

However, as Mr. Zhu Jiaming said, reform can only be promoted by those in power, because they control all power and resources. In order for vested interests to have the motivation for reform, they must be relieved of their worries. Otherwise they would prevent reform until the last moment, when revolution breaks out. Immigration and the asset transfer it causes can relieve the wealthy from their worries in several ways. First of all, there are a considerable number of wealthy people who "immigrate but do not immigrate" and are still doing business in China. But allowing their capital to flow out through immigration would help reduce the gap between rich and poor by making some of them less vehemently opposed to redistribution in the past. The feasibility of capital flow in turn ensures that the government carries out gradual rather than aggressive income redistribution reforms to prevent excessive and rapid loss of wealth.

Secondly, if the wealthy are still dissatisfied with the tax and distribution system when funds can flow, they can also choose to leave, rather than being tied to the original system and working with conservatives in the bureaucracy to block reforms. Thirdly, China's wealthy are worried not only about wealth redistribution, but also broader property security, including taxation, distribution, imperfect legal systems, and policy changes. The enthusiasm of wealthy immigrants will also prompt the government to improve relevant laws and strengthen the protection of private property, thereby better protecting the personal rights and interests of each citizen.

The idea of ​​using immigration as an opportunity to implement reforms has been practiced in other countries. As early as the 19th century in Western Europe, immigration was used to drive away troublemakers so that governments could more smoothly expand the scope of democracy. In the late 1960s, a large number of upper-caste elites in southern India were squeezed out of the government, and many chose to immigrate to northern India or abroad. This allowed the lower castes to step onto the political stage and make their voices heard. In Devesh? #21345; Poor's words, immigration has promoted the development of Indian democracy in the most peaceful way.

It should be pointed out that the prerequisites for reform in the above-mentioned countries are different from those in China today. The reforms carried out in Western Europe and India are all based on the expansion of democracy on the original basis. The reforms China needs today include improving the legal system to protect private property, establishing a relatively independent relationship between the market and the government, and reducing the gap between the rich and the poor. Each of these requires great political wisdom and courage. There is a strong voice within Western governments to support reform, but resistance to China's reform is still there. Even if executives of state-owned enterprises that control the lifeline of the national economy have transferred their assets, they still have strong enough motivation to safeguard their own interests.

But since reform is imperative, why not take advantage of the opportunity of wealthy immigrants to try it? Even if the status quo cannot be completely reversed, incremental progress is already precious. As for the loss of property, the amount is not very huge only for the rich who transfer their personal wealth (of course, the outflow of illegal funds from corrupt officials is another matter). According to statistics, the overseas assets of China's multimillionaires account for 19% of their total assets. In addition to paying the investment in the country of immigration, the main expenses are spent on the life and education of the children. To take a step back, if these properties are exchanged for a legal system that guarantees property security, a relatively independent market, and a fairer society, the price may be worth it.

Tai Qiuqing is a doctoral candidate in the Department of Political Science at Yale University in the United States.