Wealthy Chinese' enquiries on HK investment residency scheme surge
Rich mainland Chinese families with business operations in both mainland China and Hong Kong are expected to set up family offices in Hong Kong, after the city recently rolled out a series of incentives.
This includes restarting an investment residency scheme with expanded eligible assets, a higher threshold, and the possibility of renminbi-denominated assets.
Besides the incentives and the proximity of Hong Kong, geopolitics is also on the top of these Chinese families’ minds — which means they might want to avoid Chinese soil.
“It's clear that wealthy Chinese families are recognising the need to diversify both geographically and by asset class. Hong Kong maintains a significant competitive edge for these families, thanks to its close proximity and a larger capital market than many regional peers,” said Kwan Chi-man, group CEO and co-founder of Raffles Family Office.
“In particular, for mainland Chinese families keen on running their businesses in China, Hong Kong remains a highly attractive and strategic choice,” Kwan said.
“The revamped program has a crucial role in attracting capital to the region. The higher threshold means that it is meant to be targeted to individuals possessing substantial financial influence. We have observed a notable surge in enquiries from mainland clients eager to establish family offices, which is quite promising,” he told AsianInvestor.
WELCOME TO HONG KONG
When Hong Kong hosted its family office summit, the Wealth for Good in Hong Kong Summit, in late March, the government also announced a set of policies to attract global investors to set up family offices in the financial hub.
Policies are on talent development, facilities for art deals, and tax breaks for investment and philanthropy.
Among them, the new capital investment entrant scheme allows investors who invest in eligible assets with a certain amount to be able to reside and work in Hong Kong along with their family members.
The old scheme was in place from 2003 to 2015, aiming to stimulate the local capital market after Hong Kong’s economy suffered from the deadly SARS outbreak. It only allowed investments in stocks, bonds, and real estate — which was removed in 2010 — with an investment threshold of HK$10 million ($1.3 million).
The new programme, with details to be finalised, plans to increase the investment threshold “to a multiple” of the old one, and will expand permissible assets to include investment-linked assurance scheme, as well as innovation and technology companies, the government said.
Besides assets denominated in the Hong Kong dollar, renminbi assets will also be considered.
“We will also explore, apart from financial assets, new asset categories benefitting the long-term development of Hong Kong,” the government said.
A government source with direct knowledge of the matter told AsianInvestor that the objective of the scheme has changed from reviving the financial markets in 2003, to comprehensively stimulating and diversifying the local economy by attracting new capital.
Hence, the government wants to allow as many diversified investment options as possible, the person said.
The plan to include Renminbi assets will be beneficial to mainland Chinese families, said Edith Ang, head of family advisory, Asia Pacific at HSBC Global Private Banking.
Noting that families do consider location of their family offices based on factors including location of their primary operating business, or where their family members are currently domiciled for familiarity, Ang told AsianInvestor that certain families prefer a separate location for risk diversification.
“I’m not so sure how the investment scheme would work out. Because geopolitically speaking, for mainland Chinese investors, if they want to make their assets managed outside of China (and to gain residency), they won’t come to Hong Kong, but rather further away to at least Singapore, or even the US and Europe,” a senior investment executive of a Hong Kong-based single family office told AsianInvestor.
“Tax incentives are necessary, but they are also offered by other jurisdictions. So, it’s a wait-and-see how the government would implement these policies,” he said.
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The head of another Hong Kong-based family office echoed the view, noting that the residency scheme is not necessarily most attractive to mainland Chinese, who would rather get residency somewhere outside of the country. But he still welcomes Hong Kong government’s efforts.
“It’s natural for families with businesses in both mainland China and Hong Kong to set up a family office here. Hong Kong and Singapore, it’s not a choice of one. They can have offices in both cities, it is quite common,” he told AsianInvestor.
His single-family offices are located in several Asian cities, including Hong Kong, mainland China, and Singapore.
MULTIPLE OPTIONS
“Wealthy Chinese families continue to diversify their wealth and manage risks by investing in various asset classes outside China,” said Mahesh Kumar, co-founder and managing partner of Singapore-based multifamily office Farro Capital.
“Many have also sought to establish a second residential base outside of China. Several Chinese families have established family offices in Singapore and Hong Kong, working with sophisticated external asset managers to help manage global financial investments and access deal flow,” Kumar told AsianInvestor.
According to CBRE’s latest report, Hong Kong is expected to overtake Switzerland as the largest global cross-border private wealth management centre by 2026, supported by a robust inflow of global capital.
At the same time, Singapore leads in the scale of its technology industry and relevant fundraising.
When evaluating various investment hubs, Chinese investors consider factors such as economic and political stability, ease of business, access to a robust financial ecosystem, availability of visas or permanent residence options, ease of cultural integration, and access to Chinese-speaking professionals, he noted.
“Singapore continues to appeal to wealthy Chinese families since it meets all these criteria,” Kumar said.
He noted that real estate has been their favourite asset class. They actively pursue expensive commercial and residential properties in Singapore, the US, the UK, Australia, Dubai, and other countries, he said.