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Goodbye moneybags

3 November 2011 By John Foley

Half of China’s rich want to emigrate, a survey by Hurun Report suggests. Let them. China’s capital controls mean they would struggle to carry away their estimated $2.7 trillion in wealth. What’s important is to ensure that a new generation of moguls can emerge, which means making reforms that might drive the old hands out even faster.

Most countries boast a discontented elite. In Britain too, a third of the rich want to emigrate, according to a Lloyds TSB study. China’s rich have more reason to go – far worse pollution, healthcare and education, not to mention high inflation and social instability. Basketball royalty Yao Ming courted controversy by choosing U.S. nationality for his daughter Amy.

But much of what drives many Chinese away is what made them rich in the first place. Decades of funnelling cheap capital to heavy industry has created leagues of millionaires, but left a scarred landscape and environmental problems. An undervalued currency has fostered export-sector tycoons, but created an underclass of migrant workers who pose a persistent threat to the social order.

Corruption too has produced many millionaires. Credit Suisse estimates $1.4 trillion of income is undisclosed, and only Russia ranks worse on Transparency International’s Bribe Payers’ index. Finally, there are China’s closed markets, which clip the wings of the rich but nurtures their fortunes by sheltering them from foreign competition.

There is much the government can do to make sure the next generation wants to stay in China. It can come down harder on polluters and reduce the state sector’s grip on cheap capital. It can be tougher on corruption, creating a truly independent watchdog, as India just promised to do.

The trouble is that such initiatives would unseat many members of the elite who have made their millions from being able to pollute, borrow cheaply and bribe. Challenging vested interests is the biggest task for the new leadership who take over in 2013. But it’s the only way China can be sure of creating a new generation of wealthy Chinese who actually want to stay in the motherland.

 

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