2023-12-19 10:53:54
In China, the wealthiest households are seeing the value of their property plummet as a result of the economic crisis. They seek by all means to protect their wealth, if possible outside their borders.
The treasures quickly accumulated during twenty years of prodigious Chinese growth are evaporating at a dizzying pace. The ultra-rich group, these Chinese households with assets above $30 million, declined by 7% in 2022. And this is only the beginning, economists warn. Covid and confinement dealt the first blows to the express prosperity of these nouveau riche. Then, in a country where 70% of savings are traditionally invested in real estate, wealthy households were hit by the real estate crisis.
With the cascading defaults of developers, prices collapsed; we are talking about a drop of 15% in major Chinese cities. In the process, the market for so-called speculative bonds, that is to say high risk and high yield, until then very popular with these individual investors, literally disappeared. The major Chinese stock exchanges are also at half mast while other financial centers have already erased the losses accumulated during the pandemic.
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Flight of capital abroad
The nouveau riche are now looking for more secure supports to safeguard the value of their assets. When they can, they now look outside their borders, always in sectors that reassure them, such as real estate. In Tokyo, for example, Chinese households pay in cash for apartments worth millions of dollars, whereas they were more accustomed to investing amounts ten times less in apartments intended for rental.
The Chinese are also rushing to Hong Kong to open a bank account. With a very specific objective: to take out an insurance contract denominated in dollars. The sums invested in these insurances can go up to $50,000 per contract, three times more than a year ago. Converting your renminbi into greenbacks has in fact become the obsession of the wealthy, but an option that is not always easy to implement. As a result, the amount of cash deposited in the bank has soared over the past year.
Gold, a safe haven
The alternative: buy gold. A safe bet in times of crisis. In a recent publication, several Chinese banks indicate that bullion is currently sold 7% more expensive in Beijing than in their Hong Kong subsidiaries, as demand is strong in mainland China. The advantage of gold is that it is convenient to transport for those who plan to discreetly transfer part of their assets or simply leave their country.
Migration is a privilege reserved for the most fortunate. This year, billionaires around the world are migrating to countries they consider more peaceful, and among them, the Chinese are the most numerous. A phenomenon tolerated by the government, because these departures only concern households and not businesses. Given the size of China’s gross domestic product (GDP), these capital outflows are relatively painless for the economy of the world’s second-largest economy.
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