China’s rich flee crackdowns for ‘Asia’s Switzerland’ Singapore

Chinese wealth is rushing into the Southeast Asian city-state, prompting unease among some locals.

Skyline view of Singapore.
Wealthy Chinese have in recent years looked to Singapore as a safe haven for their assets [File: Edgar Su/Reuters]

Taichung, Taiwan – Before he vanished in mid-February, Bao Fan, one of China’s best-known investment bankers, had reportedly been looking for a safe place to park his wealth.

Bao, the founder of China Renaissance, was in the process of establishing a private wealth management company in Singapore to transfer money out of China and Hong Kong, the Financial Times reported last month, citing four people familiar with the plans.

Bao, who has joined a long list of influential businessmen to suddenly disappear in China, is just one of a growing number of wealthy Chinese businesspeople who have looked to Singapore — dubbed the “Switzerland of Asia” — to escape Beijing’s crackdowns on private industry and corruption.

“Wealth has flooded into Singapore from China and Hong Kong in recent years,” a wealth manager at a Singaporean bank with a large number of Chinese clientele, who spoke on condition of anonymity, told Al Jazeera.

“In confidential conversations, many of them have named the disappearances of Chinese business people along with uncertain economic times as primary reasons for moving money out of China,” the wealth manager said.

Chinese investment banker Bao Fan.
Chinese investment banker Bao Fan was reportedly seeking to move some of this wealth to Singapore before his disappearance last month [File: Mike Blake/Reuters]

Singapore, named the world’s best place to do business by the Economist Intelligence Unit, has for years been building a reputation as a haven for high-worth Chinese, particularly since the rise of Xi Jinping, China’s most powerful leader in decades, who has led his country in an increasingly authoritarian and nationalistic direction.

During the first five years of an anticorruption drive led by Xi, more than 100 high-ranking officials within the Chinese Communist Party and tens of thousands of lower-level officials and business people were prosecuted for white-collar crimes.

More recently, a regulatory crackdown on private industry that has touched on sectors from tech to education and real estate has sent money fleeing out of China.

“My clients have told me that in the current political climate in China is less tolerant towards affluent people compared to before, and therefore they wanted to get their assets out,” a supervisor at a large international bank with branches in Singapore, who spoke on condition of anonymity, told Al Jazeera.

“Previously, Chinese investors would then have looked to Hong Kong, but the city is not as attractive as an investment destination compared to before because of the years of instability and economic decline it has faced.”

Put simply, China is becoming a “less attractive country to invest in”, leading Chinese investors to seek out “better opportunities abroad,” Sara Hsu, an expert on Chinese fintech and shadow banking at the University of Tennessee, told Al Jazeera.

And while it is challenging to move large amounts of money out of China, many have found a way, Hsu said.

Chinese President Xi Jinping
Chinese President Xi Jinping has overseen a major crackdown on corruption and private industry [File: Alexei Maishev/Kremlin via  Reuters]

The influx of Chinese money into Singapore has been keenly felt in the city-state.

Mainland Chinese buyers made up nearly one-quarter of the buyers of the 425 luxury homes sold in the city in 2022, outnumbering US citizens by more than two to one.

Singapore’s residential real estate prices soared 14 percent in 2022, according to data from real estate consultancy firm Knight Frank, while prices in other cities with traditionally popular real estate markets like Hong Kong and Sydney fell by single digits, although analysts have said that domestic factors, not wealthy foreigners, have driven the surging prices.

Chinese nationals that do not qualify to buy real estate under Singaporean law have opted to rent instead, contributing to more than a tripling of the yearly rental costs of some high-end properties.

Across the city-state, rental prices increased by 33.2 percent from January 2022 to January 2023, according to the Straits Times newspaper.

A lawyer in Singapore’s wealth management sector last month estimated that the number of wealth management offices more than doubled in 2022 from 700 offices to 1500, with about half of them originating from China.

On touristed Sentosa island off the south coast of Singapore’s main landmass, the influx of foreign money has resulted in a membership at the Sentosa Golf Club rising to 880,000 Singaporean dollars ($660,000) for foreigners, double the price in 2019.

“You also notice that there are a lot more Chinese in the cityscape compared to just a few years ago,” said the supervisor at the large international bank who spoke on condition of anonymity.

“Everywhere you go you hear people with mainland China and Hong Kong accents.”

Sales manager Emma Chiu has also noticed the presence of more mainland Chinese people in Singapore in recent years.

“My friends and I often talk about how we see all these Chinese mainlanders driving around in big, expensive cars, wearing all the newest designer brands and dining at all the fancy restaurants,” Chiu told Al Jazeera.

“Some of the money-flashing by the Chinese gets a bit ostentatious for my taste, but I guess that is part of what makes them fun to observe as well.”

Singapore property with multi-dwelling houses in the foreground and multi-storeyed buildings off in the distance.
Singapore’s real estate and rental prices are soaring [File: Edgar Su/Reuters]

The arrival of more Chinese mainlanders in Singapore demonstrates that wealthy Chinese are not only looking to safeguard their assets but also their families, according to the wealth manager who spoke on condition of anonymity.

Singapore runs a global investor program through which individuals can gain permanent residency for themselves and their families if they invest a minimum amount in the country.

“So by parking their assets here, they can protect their fortunes as well as their lives from a potentially precarious political situation in China or Hong Kong,” the wealth manager said.

For moneyed foreigners seeking security for themselves and their assets, Singapore has significant draws.

The city-state is a stable tax haven that, for decades, has provided banking and investment management services to wealthy individuals from all over the world.

Since achieving independence in 1965, Singapore has been a poster child for stability. The ruling People’s Action Party has had one of the longest uninterrupted governing streaks in the world — albeit in a polity that effectively outlaws most protest and has one of the lowest rankings for media freedom.

Rates of crime and corruption are low, and the gross domestic product (GDP) per capita, at more than $72,000, stands among the highest on the planet.

For Chinese mainlanders in particular, Singapore is also both geographically and culturally close to home. The country lies within the same time zone as China, and Mandarin is widely spoken among the 70 percent of Singapore’s population that is ethnically Chinese.

But the flow of assets and people from China to Singapore might not last.

Yang Jiang is a senior researcher at the Danish Institute for International Studies where she conducts research on the contemporary political economy of China. She said that Chinese authorities could seek to further tighten their already extensive capital controls if the capital flight continues.

“If a lot of businessmen move out of China it could start to look like a Chinese brain drain,” Jiang said.

“And that is a development the government would want to stifle since China needs these private individuals to maintain its market dynamism.”

Shoppers in a supermarket in Singapore.
Singapore’s food prices have risen sharply over the past year [File: Caroline Chia/Reuters]

The inflow of foreign wealth is also not welcomed by everyone in Singapore.

While a large portion of Singapore’s housing is by law reserved for Singaporeans, insulating much of the market from foreign buying, the influx of money has been felt in other areas.

“I have heard stories of crazy spending sprees by newly arrived mainlanders,” Chiu said.

“And I also personally find that when I want to go shopping these days things are either much more expensive or simply sold out compared to before, which I think has to do with all the foreign money running through the city.”

School teacher Sean Feng said sharp increases in food prices have made it tough to make ends meet for him and his family.

Singapore imports more than 90 percent of its food, leaving the country vulnerable to external headwinds. Food inflation exceeded 8 percent in January and February, significantly higher than the overall inflation rate, according to Singapore’s Department of Statistics.

Singapore’s core inflation rate of 5.5 percent in February ranked among the highest in Southeast Asia and more than double the rates experienced by other developed Asian economies like Hong Kong, Japan and Taiwan. In December, the Economist Intelligence Unit named Singapore the most expensive city to live in along with New York City.

“A lot of daily items are a lot more expensive now,” Feng told Al Jazeera. “I know inflation has been bad everywhere the last few years, but when so many people with so much money settle here, it is bound to make it even worse for us.”

“I just hope that Singapore can be a place for all those that call the city home,” Chiu said, “and not just a place for the super-rich.”

Source: Al Jazeera