A recent study by Barclays provides insight into the trend of high net worth individuals becoming more international and moving between countries. While globalization is an obvious driver of this trend, other factors include the growth of entrepreneurship as a more prevalent source of attaining wealth (as opposed to inheritance), technology, and the shift of economic weight towards Asia. In fact, by the end of this year, Asia is predicted to become the largest regional market of millionaires in the world. China already has the second largest number of millionaires after the United States.
The influence that the number of high net worth individuals (HNWI) from Asia has on the ‘rise of the global citizen’ brings up some questions. What drives these millionaires, many newly minted, to leave their budding economies, pack up and move abroad? And, how will this affect the economies of their home country?
It is estimated that 47% to 64% of Chinese millionaires plan to leave their country in the coming years. While motivating factors are generally attributed to financial reasons, better tax rates for instance, the Barclays study also found that among the under 45 crowd, better education for their children, economic opportunity and career development dominated priorities when considering a global move. Interesting enough, better weather was a dominant factor as well, possibly a result of the pollution and weather changes resulting from rapid urbanization and development.
During the global economic downtown, countries spanning from North America to the EU have opened their doors to newcomers willing and able to invest in the adopted country. And, as these markets rebound, Chinese and other Asian high net worth individuals can profit from investment opportunities in rebounding economies. 62% of those from the Asia Pacific list better opportunities for high returns and/or interest rates as the reason behind holding financial assets outside of their home country.
This gives the adopted country, the United States for example, the opportunity to cater to these individuals in ways that will benefit both parties. For instance, private Chinese investment funds can be used to build up property, as real estate remains a favored asset class. But, as a new generation of Chinese HNWIs migrates west, and 43% do head to North America, perhaps they can also participate and help fuel other industries. Whether providing capital to start up companies or other more risk tolerant investments, the inflow of wealth from Asia could be a valuable crutch in the recovering American economy. Essentially, as Chinese and other Asian HNWIs diversify in their geographical ‘home,’ they will begin to diversify in their investments opportunities.
But, what happens back at home in their home country? Just as many countries fear a ‘brain drain,’ is there cause for concern that Chinese HNWIs are leaving the country opportunities abroad? The full impact remains to be seen. I would imagine that a second citizenship or residency and opportunity to park investments abroad would not hinder HNWIs to continue to participate in their home country’s economy. Rather, the opening borders to the wealthy elite give them more options in diversifying their investments. Furthermore, the sources of the wealth, as they are now more entrepreneurial, would also remain within the country. On the other hand, there has been a migration within China as well, with the wealthy leaving rural area to the economic hubs. As the wealthy then begin leaving for and investing abroad, the economic conditions in rural China could be damaged and left out of the growth and prosperity.