Taiwan expected to see pick-up in HK asset migration
The worsening political tensions in Hong Kong and China’s encroachment on Hong Kong freedoms could hasten the departure of both individual residents and their capital to other destinations. Singapore is seen as a natural beneficiary, but some senior financial executives argue that some individuals may favour shifting themselves and their assets to Taiwan.
As the political crisis between the Hong Kong government and a large number of disaffected citizens rolls on, cautious investors and those nearing retirement are considering whether to stay in the city or shift to somewhere safer.
Taiwan is seen as a possible destination, given its proximity to and political independence from Hong Kong and China, plus the fact its people speak Mandarin, which is understood to some degree by many Hong Kong citizens.
Julian Liu, president of Taiwanese fund management firm Yuanta, believes the growth of Hong Kong residents emigrating to Taiwan is accelerating. “A lot of people are moving to Taiwan not only because of the China situation, but also the cost of living and the affordability of property,” he told AsianInvestor.
Liu also noted that many more Taiwanese people are moving their money back to Taiwan from mainland China. "One reason is the US-China trade war. Another is the common reporting system (CRS), which means Taiwan will increasingly be seen as a tax haven," he said.
The CRS is a cooperation between tax authorities for bank accounts on a global level, designed in 2014 to combat tax evasion. Taiwan is not a signatory to it.
INDIVIDUAL SHIFTS
Foreign governments, including the UK and the US, have suggested that China’s undermining of Hong Kong's Basic Law and the concept of 'one country, two systems', threatens the competitive edge of Hong Kong as a global financial hub.
To date global businesses in the city, including asset management firms, have not reacted with any great alarm to the recent protests. None have announced any plans to shift their operations. But individual investors are not so committed, and some investment professionals and private wealth managers have expressed doubts about Hong Kong’s longer term appeal as a wealth management centre in comparison to places like Singapore and Taiwan.
Blair Pickerell, a Hong Kong industry veteran who has lived in Taiwan, told AsianInvestor, “I wouldn't be surprised if recent events cause an uptick in emigration”.
He added that he believed that emigration applications from Hong Kong have increased over the past year, and that Taiwan could naturally appeal to nervous Hong Kong-based people. “It is nearby, it has Chinese culture, but it has freedoms. Many people pop up for a long weekend. And I have heard of a few people moving there, especially in retirement as the costs are lower.”
Taiwan is already one of the most popular locations for Hong Kong to move to. A 2017 survey on favoured emigration destinations by the Chinese University of Hong Kong revealed the three most popular emigration destinations from Hong Kong were Canada at 18.8%, Australia at 18% and Taiwan at 11.3%.
According to the survey, the three most attractive features for Hong Kong respondents planning to move to Taiwan were “ample living space” at 35% of responses, “better air quality, less pollution and beautiful environment” (22.3%) and “more liberty and better conditions for human rights” at 15.6%.
Lawrence Li, an officer at Hong Kong’s Security Bureau (SB) told AsianInvestor that Hong Kong residents travelling abroad are not required to inform the government of their purpose of travel, so exact number of emigrants are difficult to provide. However, the SB estimated that the number of emigrants rose from 6,500 in 2017 to 7,600 in 2018, with Australia the most popular destination.
POLITICAL TENSIONS
The ongoing nature of the political protests in Hong Kong (there was another protest march on Sunday) appears to indicate a longstanding resentment about the seeming growing influence of Beijing on Hong Kong’s political priorities, as well as unhappiness among younger people about the cost of living in the city.
When combined with the government's unwillingness to withdraw the extradition rules has left a rising number of wealthy individuals and businesspeople worried that the government could leave them vulnerable to extradition to China - and more open to a potential relocation.
Taiwan has its own political issues with China too. The island is effectively entirely independent but the Chinese government still claims the island to be a rogue province that is a part of the country. Yuanta’s Liu argued that Taiwan is in a much better position than Hong Kong for individuals seeking more individual and investing freedom.
"For Hong Kong, there is no way to turn it around, because it belongs to China. Whereas in our view Taiwan is a different country and so we have the opportunity to fight. Maybe we will lose, but at least we can fight, or close the door and not have any interaction with China."
However, the ongoing tensions between Taiwan and China could limit its long term appeal as an alternative to Hong Kong.
"If you don't like China infringing on Hong Kong, then I'm not convinced that many of those types will view Taiwan as a viable long-term solution,” said Pickerell. “There are many more people in Taiwan demanding [official, as opposed to de facto] independence than in Hong Kong, and we know that this is an 'absolutely no' from the PRC (People’s Republic of China).”