Bringing overseas alternatives to China's wealthy

Jennifer Lai of Henley & Partners

Feb 1, 2015

Download PDF

Bringing overseas alternatives to China's wealthy

As a growing number of China's high net worth and ultra high net worth families look for effective ways to protect and transfer their assets, residence planning is increasingly on the agenda, explains Jennifer Lai, head of business for Henley & Partners in Hong Kong.

The ancient Chinese proverb, “fu bu guo san dai”, is common for a reason. Literally translated, it means “wealth does not pass three generations”, referring specifically to the fact that wealth typically gets diluted and destroyed by the time it reaches the third generation.

In efforts to change this pattern, however, a growing number of wealthy Chinese patriarchs and families are starting to plan ahead – and in a more structured way.

To do this, they are enlisting the services of wealth planning specialists of various types to put in place frameworks and solutions to protect their assets.

And an increasingly large number of families are looking beyond diversifying their portfolio simply by investing abroad. More specifically, they’re planning on relocating abroad.

Some of them are looking to change their residences to enjoy lower – sometimes zero – tax rates. Others are seeking better education and lifestyle options for their families.

How they achieve that is certainly not a cookie-cutter approach. “We can’t specify one option for all of our Chinese clients, it really depends on what individual families are looking for, on their priorities, and on the ultimate goal they have for the future,” says Jennifer Lai, head of business for Henley & Partners in Hong Kong.

Residence options to consider

Given that China only recognises single citizenship, people seeking an alternative base in another country need not give up their Chinese passport.

There are other ways to derive benefits from having access to international jurisdictions without giving up their status in China. For example, obtaining a residence visa is a popular option.

While Hong Kong and Singapore have been among the traditional choices for relocation, Lai says that Canada and the US remain at the top of the list for some families.

Going forward, however, Malta is a jurisdiction which can offer opportunities for Chinese citizens.

“The future for China will be Malta,” predicts Lai. “It is in the EU, and that allows people to reside, be employed or send their children for education in 28 European countries.”

A need for confidentiality

In helping Chinese clients achieve their objectives, privacy and confidentiality are increasingly a key requirement.

“Chinese clients are paying a lot of attention to data protection and the security of their personal information and background,” explains Lai.

In line with this, there is a certain level of confidence she has observed about residence options in the EU or the US, because of the strong sense of privacy which exists in these countries.

And even the implications of regulations such as FATCA and other initiatives don’t seem to be hindering her Chinese clients at the moment.

Chinese immigration services

Winning business in this field in mainland China, however, doesn’t only come down to technical knowledge. It is essential to have a solid reputation and a strong client base to be able to secure new business among the local wealthy, given the levels of trust and comfort required to discuss such matters with various external specialists.

Lai explains that Henley & Partners also calls on the expertise of third-party service providers like banks, law firms, accounting firms and asset management companies.

Jennifer Lai

Managing Partner, Head of North Asia at Henley & Partners