Rich Chinese return to Hong Kong as Singapore steps up regulatory oversight

Hong Kong - Hong Kong is winning back wealthy Chinese by rolling out the red carpet for the rich, while rival Singapore scrutinises foreign money.

The Chinese territory is expected to welcome about 200 high-net worth individuals in 2024 after five years of millionaires skipping town, according to data provided by intelligence firm New World Wealth and immigration consultancy Henley & Partners, thanks to initiatives including family office tax concessions and visa and residency programmes.

The fallout from a $3 billion money laundering case has put Singapore’s family offices and wealthy immigrants under the microscope.

It is a shift from the pandemic years when Hong Kong’s strict quarantine and political upheaval led to mainland Chinese flocking to Singapore. Private bankers, service providers and insurers say Hong Kong business is picking up, while Singapore’s stepped-up money laundering rules are putting some customers off.

Hong Kong’s assets under management grew 2.1 per cent to HK$31 trillion (S$5.4 trillion) in 2023. Driven by a strong performance of private banking and wealth management, net fund inflows jumped more than three times to nearly HK$390 billion in 2023, Financial Secretary Paul Chan wrote on his blog in July. In 2022, private banking and wealth fund inflows slumped about 80 per cent.

Under a microscope

In Singapore, the fallout from the money laundering case means some banks are redoing their know-your-customer process, and rich Chinese in Singapore are under a microscope, according to two private bankers. Their clients are frustrated with the process and the questions being asked, they said.

The Monetary Authority of Singapore in April introduced a digital platform to share customer information to combat money laundering. Since then, a service provider in Hong Kong said it received more than 15 inquiries from wealthy Chinese seeking to move or set up family offices in the city. Half of those inquiries have resulted in actual business, they said.

“For many of the mainland billionaires, because they don’t like the arbitrary government interventions or government checks or threats to their personal wealth, that’s why they want to move money out of China,” said Dr Chen Zhiwu, professor of finance at the University of Hong Kong. “If Singapore would do as many checks and tighter regulations as the mainland, then why would they want to go there?”

Dr Chen said he knows billionaires who have “warmed up” to basing more of their family office business in Hong Kong as their enthusiasm for Singapore has waned.

Pull, capital

In Hong Kong, business at the China desks of private banks has picked up while the pace of growth at the same groups in Singapore has slowed down, meaning less money is moving to Singapore, said two senior private bankers.

Hong Kong has benefited from the reopening of its borders in 2023. It has efficient connections to Shenzhen and the Greater Bay Area via its high-speed rail line. That is attractive for wealthy Chinese who want to closely monitor onshore businesses.

“Despite the political changes in Hong Kong and a number of challenges associated with that, there remain meaningful reasons for wealth and business owners to develop and maintain connections to Hong Kong,” said Mr Philip Marcovici, who consults with global families and financial institutions on wealth and taxation.

The city’s introduction of the top talent visa programme targeting high-income earners and university graduates is paying off, with more than 68,000 applications approved since its introduction in 2022. Ninety-five per cent of those are from mainland China, according to government data.

One of the recipients is Mr Wang, a tech worker from Chongqing who said a Hong Kong identity card allows him to travel more easily to the US and other places for work.

Many of his friends were worried about the future direction of Chinese government policy during Covid-19 and sought residence elsewhere, looking for more neutral ground amid rising geopolitical tensions. While there is a narrative that Hong Kong is becoming more like China, he says it remains more open, particularly for capital flows.

“Hong Kong is still a good place for business people,” he said, particularly “if you want to travel a lot or move your money freely”.

Pick up

According to the two senior private bankers, revenue in Hong Kong grew by double digits in 2024, driven by Chinese clients. Most clients have assets of US$5 million to US$10 million (S$6.75 million to S$13.5 million) and are not in the ultra-rich category, another private banker said.

It is still difficult for Chinese nationals to move money offshore and billionaire wealth creation is hampered by a sluggish market for initial public offerings in Hong Kong. But Chinese money that was going to Singapore is now headed to Hong Kong, another senior banker said. That is supported by data including sales of insurance products popular with wealthy Chinese from the mainland, which jumped 63 per cent to HK$15.6 billion in the first quarter compared with the same period in 2023.

In June 2021, the government set up the Family Office Hong Kong team to encourage the growth of the city’s wealth management industry. Since then, about 64 family offices have been established or expanded their business, with 49 coming from the mainland, according to government data.

Money laundering

Still, revelations from Singapore’s money laundering scandal are triggering concerns in Hong Kong that some of the new arrivals have something to hide.

A plan that offers residency to people who invest HK$30 million in Hong Kong has attracted over 250 applications since its March launch to end-May. According to official data, nearly 200 are from Guinea-Bissau and Vanuatu, countries where cash for residency programmes have been used by financial criminals.

Chinese nationals holding passports from Vanuatu, Saint Kitts and Nevis and Turkey were among those convicted in Singapore’s money laundering scandal. “It creates doubts about money laundering,” said Dr Alicia Garcia-Herrero, chief economist for Asia Pacific at Natixis.

Hong Kong’s financial secretary wrote on his blog in July that more than 340 applications have been received for the residency plan since launch and if approved, they are likely to bring more than HK$10 billion to Hong Kong.

Migrations

Singapore remains a popular destination for migrating millionaires. It is forecast to welcome a net 3,500 millionaires in 2024, the third most globally, according to Henley & Partners.

But Hong Kong’s population of millionaires is finally forecast to rebound after losing about 500 to migration in 2023, according to Mr Andrew Amoils, head of research at New World Wealth, Henley’s research partner. “Despite a tough past decade, Hong Kong is still one of the world’s top millionaire hubs,” he said, adding that there is “definitely a turnaround there”. BLOOMBERG