“Wealth consists not in having great possessions, but in having few wants.” — Epictetus
Unfortunately, unlike the Greek philosopher, we Chinese believe that “Money can buy a lot that is not even for sale.”
When it comes to investment, if we take the long-established financial market in the West, people participate in the investment market through stocks, bonds, and funds, which are incorporated with a perfect exit strategy, strict supervision, and robust institutions that statistically enable a market pattern of bulls and bears, and most people can benefit from the market.
However, in China, insider trading, price manipulation, financial fraud, the overwhelmingly low delisting ratio, combined with the emphasis on over financing but low dividend payout and the lack of protection of retail investors’ interests , all contribute to a market which consists of a high proportion of junk stocks, the bulls are short and the bears are long, stock trading and junk bond default have become high-risk investment techniques with such a high level of danger.
Most stock traders have seen a period when the stock price has increased and they have made a profit, but most individuals pursue the rise and fall and finally become trapped or opt to reduce the loss. In the end, more than 70% of investors lose money.
Hence, brick and mortar has provided a much safer alternative, and is definitely becoming one of the top choices for the Chinese investor’s list.
Aside from domestic properties, Chinese investors flock out 104.8 billion on overseas properties from holiday homes (31.8 percent), investment-driven properties (26.4 percent), education (for kids)-driven properties (21.1 percent), immigration-related properties (14.3 percent), and retirement-related properties (5.4 percent) from 2017 to 2020.
In recent years, especially since 2019, family offices are also emerging and maturing rapidly, as a system of combined investment forms. From single-family to multi-family office, once a wealth preservation tool of rich families for their offspring, now it is more commonly a vehicle for private equity investment and wealth accumulation. And the market is booming. Assets-under-management (AUM) grew from about $4 trillion in 2017 to $5.9 trillion last year.
Chinese family offices with relatively substantial volumes may allocate more than 50% weight to private equity (PE), while the market average is about 20%. Alternative investments did, in fact, become the asset class with the highest financial performance.
Despite its enormous potential, China’s family wealth management market still struggles with weaknesses such as lack of standards, uneven level of management capabilities, and practical obstacles in actually carrying out wealth management. Hence, in certain aspect, especially in a macro view of global asset diversification, a well-established and trustworthy regional partner like Consulco Group would align the interest of providing comprehensive wealth management services.
Countries Chinese invest into:
US, UK, Switzerland, Canada and Australia have long been the Chinese top investment preferences. However, even with the new Biden administration, the aftermath of the 2018 US-China trade war is still instigating frictions and resulting in a halt on the majority of investment and trading fronts between the US and China, while the repercussions on the matter have soured Canada’s and Australia’s relationships with China as well. That is why, most of the Chinese entrepreneurs and investors are steering towards Europe now, with a bandwagon effect.
Chinese investment sentiment in UK:
UK and China have been enjoying mutual beneficial relationships. According to Hurun’s (China’s Forbes) Survey, London, as a global financial center, an international education base, and an investment haven, is the first choice for many wealthy Chinese to invest for asset diversification, especially in the real estate sector.
Now that the UK has withdrawn from the European Union and has been exacerbated by the Covid pandemic, many Chinese who are still planning to invest in overseas markets may ask in their hearts: Is London’s real estate still worth investing in?
Indeed, Brexit and the Covid pandemic have been a double blow to the British economy and property market. But there are also new opportunities hidden in the crisis.
It is generally believed that Brexit is the most imprudent decision made by the United Kingdom to impair its economic interests, but Brexit is not without benefits. First, the United Kingdom has gained a higher degree of policy freedom in economic development and administrative jurisdiction; second, with no EU’s entanglement, the UK can sign free trade agreements with economies outside the EU, and many has been done with China and Japan already.
Evidently, it has not slowed the Chinese investors’ enthusiasm for real estate in London, especially in commercial real estate; it is rather deemed as a rare acquisition opportunity. Research shows that in 2020-2021, investors from all over the world will compete for landmark commercial buildings in London, with Chinese buyers becoming the largest potential investors. It is estimated that in 2021, global investors will spend 46 billion pounds to invest in British commercial real estate, of which Chinese buyers become the largest potential investors and with invest approximately 12.8 billion pounds, and followed by 10.8 billion pounds from Singapore and Hongkong (those are mainly Chinese who got the money out) The total pre-allocated investment of other European countries is only 5.5 billion pounds.(Knight Frank)
For decades, Hong Kongers have bought properties and collected rent as a source of income in Hong Kong and mainland China, and now, more are beginning to acquire houses and apartments in the UK with the intention of renting them out to generate money. This tendency corresponds to the projected surge of immigration after China’s passage of the Hong Kong National Security Law last year.
After China implemented the Hong Kong version of the National Security Law, the British government provided new visas to Hong Kong people holding British Overseas Passports (BNO), giving them the opportunity to become British citizens.
When applying for citizenship, stable rental income will help, because BNO holders need to prove that they can be financially self-sufficient for at least six months.
London estimates that more than 300,000 Hong Kong residents may immigrate to the UK in the next five years, and Bank of America expects that Hong Kong residents’ immigration to the UK may trigger a capital inflow of 36 billion dollars in 2021.
Demand on Cyprus
China’s “One Belt, One Road” initiative, implemented in 2013, has substantially facilitated political, economic, and cultural contacts between China and Western nations. Many investors have moved their focus to the west, valuing ventures in Western countries with low starting points and rapid growth investment opportunities. Cyprus, which has strong relations with China, is also one of the most important investment destinations.
The recently announced measures on tax benefits and third-country employment will encourage Chinese investors and entrepreneurs to develop and expand their businesses in the EU market, using Cyprus as a gateway.
Furthermore, Cyprus is a picturesque holiday destination that draws numerous tourists each year, as well as a permanent residence alternative that will allow investors and their families to experience a new lifestyle in Mediterranean culture, if desired.