Is China Losing its Luster?

Monday, November 7, 2011 23:24
Posted in category The Big Picture

When I first arrived in China, I was having coffee with a friend who told me the best “China” strategy for expats was to rotate time between China and the US every two years.  This would allow one to remain fresh enough on China, yet have a solid network in the U.S. that could be leveraged as well.  In part this “strategy” is one that is borne from a place deep in the vast majority of expats in China…. that they have no idea what they will do should they leave China, and they better have options should (1) all hell break loose (2) should they tire of China or (3) should they find their visa would no longer be renewed.

Recently, what I am finding is that this conversation (of China exit strategies) is kicking into full steam.

To the point where I would say better than 90% of my conversations will touch upon the subject, and a significant number of conversations are solely about how to leave China.   When is the best time.  What are the opportunities to leave.. and would they missing be apart of the greatest show on Earth (as we are told it is).

It’s a conversation that interestingly enough was the focus of a Bank of China report highlighted, that found more than 50% of China’s wealthy were looking for the exit as well.

Not the first report I have seen on the topic, what I did find interesting was the (public) explanation for why many were looking to move:

Half of the investors said they want to leave for better overseas education opportunities for their children. About a third invest abroad as a step toward emigration, while a quarter of them do so to diversify and manage risk.

Observers believe that personal and capital safety is an increasing concern for the rich who are choosing to transfer their wealth overseas.

“We see too many worried entrepreneurs nowadays who are afraid that they would end up in prison for offending Chinese officials,” Beijing-based scholar Hu Xingdou

Some would say that this is nothing new, but with the average age of the respondents was 42, I’d even argue that the deteriorating environment (air quality, food issues, etc) are also catalyzing this move given they are likely to have small children (on average) in the 5-8 year old range… children who have been exposed to a number of health risks…. melamine, asthma, and diabetes.

Root causes aside, the wider meaning to China of potentially loosing large numbers of its wealthy should not be lost as it may mean that China is about to experience a brain drain (of expats and Chinese).

Not a good position for China, particularly at a time when China’s economy still has to make the transition to a “high-value” “innovative” economy, and when Beijing is doing its best to close the wealth gap.

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11 Responses to “Is China Losing its Luster?”

  1. Andrew Hupert says:

    November 8th, 2011 at 12:29 am

    I’m outta here in 2012.  I still like China and the “China Story”, but it is switching positions with the US.  I find that China (or at least Shanghai) is taking on the role of the established market — developed, saturated, expensive and entitled.  The US, with it’s large pool of available labor and bombed out industrial base is the new emerging market.  If the BOC is right, there will soon be a long line of Chinese investors with suitcases full of cash ready to try to make things happen in the US.  

  2. Michael Zakkour says:

    November 8th, 2011 at 4:50 am

    Nice post. Definitely food for thought. I still see plenty of reports, studies, media storiies that state the opposite. That young people from the US and Europe want to go to China b/c that is where they “think” the opprotunity is. It is also true that many overseas educated Chinese move back for the same reasons. Maybe it’s an age/experience gap.

    Andrew, I am really surprised to hear you say that you are leaving. I also question what the appetite for US investment on the part of Chinese businesses in the US is. My experience to date is that they don’t have the stomach, patience, understanding or money to do it right and would rather invest domestically or in real emerging markets.

  3. Rich says:

    November 8th, 2011 at 6:46 am

    Long time Andrew!

    I have had a number of discussions about returning to a U.S. that would in some areas resemble a third tier Chinese city where the lessons of China could go a long way to getting that city back on track.

    …. and I have several friends who are building their network to also facilitate Chinese investor trip to the US. It is an interesting market, and can be very lucrative if you are able to position yourself as a successful conduit of deals.

  4. Rich says:

    November 8th, 2011 at 6:51 am

    Michael.

    I think this is where it requires a bit of segmentation. The Chinese who are in the study are HERE, and are looking to leave… yet there are still plenty of people OUTSIDE China who are looking to relocate. Which is something that I have seen from a money flow perspective as well.. Chinese money moving offshore… western money moving into RMB funds..

    Question is – which trend should be followed, and what is the meaning of the trend?

    Thanks for the comment, and feel free to share some of the studies you are seeing.
    R

  5. Remembering Talk Talk China and the “Cycle of Funk” | Imagethief says:

    November 9th, 2011 at 3:45 am

    […] on it. Rich Brubaker of the long running “All Roads Lead to China” business blog wrote a post touching on this just yesterday. It would seem that the “cycle of funk” is not just a personal thing, […]

  6. gregorylent says:

    November 11th, 2011 at 4:01 am

    now is a time on earth where the underlying frequencies have come to the point where real transformation can begin … and we will find ourselves naturally moved to the place where all our life experiences are most needed … allow it 

  7. Chris Devonshire-Ellis says:

    November 12th, 2011 at 11:12 pm

    I’m also leaving China next year. But to Singapore. Emerging Asia is the real growth market, that’s the de facto capital city, and the United States never really went away in the first place – it has plenty of money and we’re putting in marketing offices there too. My Emerging Asia (including China) strategy is here: http://www.2point6billion.com/news/2011/10/31/the-three-pronged-trident-strategy-for-investing-in-asia%e2%80%99s-massive-growth-10363.html

    Cheers – Chris

  8. Rich says:

    November 13th, 2011 at 12:21 am

    Chris.

    While I have no timeline, Singapore is my first choice. I’ve spent a lot of time there in the last 18 months, and while I used to prefer HK to S’pore, I am now fully converted.

    … and I can tell you that the numbers of former Mainlanders is growing. I already have 15-20 friends there, who were formerly in SHA, and another 2-3 whose companies are moving them by year end.

    R

  9. Chris Devonshire-Ellis says:

    November 13th, 2011 at 2:29 am

    Of course Rich, I see no surprises there. Singapore is the financial centre of ASEAN, half way between India and China, and with the rest of emerging Asia on the doorstep. What’s not to like? Hong Kong is purely a mainland China play, you have markets beyond that you need to be in Singapore. I’m rolling out several currently China based employees from Shanghai and Beijing to Delhi and Mumbai from Q1 next year. 2012-2020 is India’s turn. But – for wannabe expats – you can’t just tap up in Sing and get a job. Its only a small place and to be here your company needs to be financially solid (they have provide a bond of one years salary) and the individual employees need to produce professional qualifications, university degrees and so on. The Switzerland of Asia, in other words. No spitting here.
    Cheers – Chris

  10. Frontier Strategy Group says:

    December 5th, 2011 at 11:29 am

    Asia’s outlook has darkened over the last month, partly due to declines in the Chinese property market which injected uncertainty into the region’s growth forecasts. While these developments will require active monitoring, multinational corporations should keep them in perspective. Asia is still better positioned to weather a global downturn than most other regions. FSG forecasts an average growth rate in the Asia-Pacific region of 4.8%, with only Japan experiencing negative growth. While China is projected to have a deteriorating economic environment, it still blows its neighbors out of the water with a growth rate almost 2 percentage points greater than that of its closest competitor, India.

  11. Ranjeet Masala says:

    December 30th, 2011 at 1:56 pm

    All well and good but that 2% is probably China manipulating it’s stats in real life. India is almost certainly more.