Wealthy Chinese are expected to park fewer funds in Hong Kong on worries that Beijing’s proposed national security law for the city could allow mainland authorities to track and seize their wealth, bankers and different business sources.
More than half of Hong Kong’s estimated private wealth of over US$1 trillion is from mainland individuals who have parked money there, according to bankers.
The city has benefited from its proximity to China and separate legal system, but there are now worries about it losing its edge as a global financial centre due to capital and talent flight.
Interviews with half a dozen bankers and headhunters have revealed that some Chinese clients are looking for other hubs as their main offshore wealth base with Singapore, Switzerland and London high on the list.
One Chinese client who had been scouting investments in Hong Kong instead bought five apartments this week in Singapore via a newly set up family office, said the person’s adviser with a European wealth manager.
“Singapore has been on their radar for a while now, but Hong Kong has been the default booking centre for them,” said the Singapore-based banker, who, like his industry colleagues, declined to be identified due to sensitivity of the matter.
He said his bank had begun receiving inquiries from Chinese high net worth individuals (HNIs) about opening accounts outside Hong Kong.
“Chinese HNIs like the law from the perspective of their love for the Chinese flag, but not from their asset protection perspective,” he added.
In another example, the founder of a Hong Kong-based boutique wealth manager focused on helping Chinese clients set up family offices said his firm was in partnership talks with two Dubai-based banks after receiving inquiries about setting up investment vehicles there.
The expected shift has led some wealth managers to tap corporate recruiters to help hire Mandarin-speaking client advisers in other locations including Singapore and Switzerland, said the sources.
Globally, Hong Kong ranked second in wealth per adult after Switzerland in mid-2019, and 10th in the number of people with more than US$50 million in assets.
A planned law last year that would have allowed extradition to China from Hong Kong was shelved after months of increasingly violent protests, but it sent shivers through the city’s wealthy who feared Beijing could have used it to freeze assets. Some went so far as to move funds.
Now the proposed security law is triggering concerns about the semi-autonomous city’s freedoms and particularly, the legal protections it offers.