By Wang Xiochuan (王小川)
March 4, 2013
Economic Observer Online
Translated by Laura Lin
Original article: [Chinese]

Just like scandals involving corrupt officials, news about emigration and property purchases abroad by Chinese citizens can quickly set off waves of anger.

The latest comes after a recent article from the Wall Street Journal reporting on the large number of property buyers from China aiming either to emigrate to the U.S. or set their children up with housing while they study there. China's web portals and micro-blogs erupted right away.

The public often presumes that many of these homebuyers are corrupt officials, or at the very least, the nation's wealthiest eager to move their assets abroad. .

Putting aside whether or not these notions are even correct, it is worth looking into just why the Chinese public lashes out at their compatriots considering a move abroad.

To begin with, I don't believe corrupt officials make up the majority of those Chinese homebuyers abroad. Though I don't have the hard numbers to prove it, there is plenty of anecdotal evidence that it is mostly the growing middle-class and rich buying up foreign property and looking to emigrate.

Experience tells us that people tend to be path-dependent. The increasing importance that knowledge and education play in a person's success, the more one attaches importance to their own child's education.

Based on this logic, the middle-class and wealthy would be more likely, and able, to invest in their children's future. Similarly, the middle-class and the rich are also much more sensitive to the context of their surroundings, particularly to the legal and institutional environment. All this raises their interest in emigration.

Some indirect data supports my judgment. Last year it was reported that there were 2.7 million Chinese people who possess at least $1 million in net assets, among whom 30 percent have invested in real estate overseas. Of course, it's quite difficult to accurately calculate the revenues of corrupt officials, while regardless we can all agree that 2.7 million is a considerable figure.

Even if only a small part of this population invests in a country, it can have a significant impact on the local government. According to the Wall Street Journal report, out of $70 million of transactions at a New York real estate agency last January, 30 percent came from Chinese customers. The trend of Chinese people buying properties abroad has actually become a strong external force helping the American real estate market to recover.

Student Wisdom

Choosing freely how one likes to live is a citizen’s basic right. So is the choice of education one likes to receive. Therefore, no matter what the purposes of our compatriots who buy property abroad, we need not impose our moral judgments on them. As long as their sources of wealth are not illicit, how they like to dispose of their wealth is their own business.

China is still a developing country. In comparison with advanced countries, the levels of public services, legal standards, and environmental protection are still far behind. If a portion of Chinese people are willing to live or study in advanced countries, it’s also a symbol of China’s rise.

However, just as with trade, these outflows should be balanced. In the current stage, it’s understandable that, as a latecomer, China’s outflow of funds and people is higher than that of the inflow. But if this remains out of balance, then it won’t be normal. 

A continuous outflow of funds will eventually harm the economy. From an economic point of view, it is necessary to build a breakwater against capital outflow.  It is best to be as open as possible to create opportunities for domestic investment, and in particular in the liberalization of services, including the audiovisual, press and publishing sectors. Capital is the lifeblood of an economy. If there’s a blockage, it will be detrimental.

From the social point of view, the authorities do indeed need to pay close attention to a maintaining a harmonious society, raising the level of China’s public services and improving legal standards. As one high school student pointed out when he was interviewed by a television program discussing the “naked businessmen” who send their families and fortune overseas, if our bridges were more solid, if our food was safer, and our civil servants were less corrupt than those of other nations, we wouldn’t have so many naked businessmen.

I wholeheartedly agree with this young person. Making his “ifs” come true one day will help put an end to Chinese people suffering from so many American dreams.

News in English via World Crunch (link)