Citizenship on the Horizon

Citizenship on the Horizon

By Claire van den Heever

There is a rising trend in China that, although beneficial for the Chinese nationals who are increasingly partaking of it, is not as often embraced by those that they leave behind. Economic citizenship, also known as second citizenship or citizenship by investment, has become a buzzword among China’s growing number of high net worth individuals, for whom embarking on a new life abroad is an opportunity that often brings enormous social and financial benefits.

A 2011 study by the Bank of China and Hurun Report revealed that as many as 46 percent of Chinese with assets worth more than RMB10 million (US$1.57 million) are considering moving abroad, and another 14 percent have already begun the process. Almost a third of respondents had investments abroad which would enable them and their families to emigrate or be resident abroad – in most cases to one of a handful of countries, all of which have a unique combination of factors that make them popular choices for immigration.

America has long resembled the Promised Land in Chinese estimations, whether it is the country’s superpower status, its reliable judicial system, a reputation for efficiency, or images of suburban utopia that have helped to create this perception. What is certain is that the number of Chinese with a desire to call America home is not showing any sign of slowing down. According to recent surveys, the United States is the single most popular country among Chinese nationals looking to emigrate. The youngest of the world powers, America has a long history of immigration, a fact which almost certainly enhances the country’s appeal to would-be immigrants. Foreign communities abound in hundreds of major cities, and Chinese communities have always had a strong presence.

In 1980, foreign-born Chinese were the tenth largest immigrant group in the United States; by 2006, they totalled 1.6 million, making them the third largest group after foreign-born Mexicans and Filipinos. More than half of Chinese had become naturalised American citizens in 2006, and today, Chinese living in the United States are believed to be second only to Mexicans in number.

Universities are a major point of entry for Chinese into America and, though immigration is not necessarily foreign students’ goal, there is a definite correlation between rising student numbers and rising instances of emigration to the United States. American educations have become widely regarded as a means for young Chinese to gain a competitive advantage in the job market, often to the extent that a degree from an American university is expected to put graduates on a fast track to success. The percentage of high level government officials in China who were educated abroad in the US or the UK is particularly high but, as incomes rise and English language proficiency becomes a prerequisite for climbing the corporate ladder, youth from a broader social spectrum are finding their way into American high schools and universities.

According to a report in the China Daily, the People’s Republic is now the single largest source of international students in the United States. Apart from exposure to new cultures, language skills and the internationally recognised qualification that studying in the US affords, the investment may bring greater returns to top students in the future. A proposed immigration bill that advocates extending the scope of green card issuance to include science and engineering graduates would mean they were automatically granted the right to live and work in the US if the bill were passed. Retaining select graduates opens up the potential in the US for what has been dubbed “brain gain”, in contrast to the brain drain that countries like China increasingly face. Already, almost 92 percent of Chinese students with doctorates in science choose to stay in America after completing their studies, according to a US government study. Science Magazine reported that the majority of Chinese doctorate students studying in the United States gained their undergraduate degrees from Tsinghua and Peking University, two of the country’s top three universities.

Trends like these have the potential to vastly change the demographic landscape of Chinese immigrants who, under current immigration laws, are required to make considerable financial investments in order to acquire American residency or citizenship. An investment of US$500,000 into US elected projects is required for a two-year temporary residence visa, after which permanent residence in the form of a green card will be granted. Seven years down the line, US citizenship may finally become a reality. But for some, seven years is simply too long to wait.

For would-be émigrés who don’t have time on their side, St Kitts and Nevis is an extremely attractive option, and its growing popularity among Chinese is testament to that. The tiny two island Caribbean nation offers citizenship by investment programs that cater to clients who wish to obtain a second passport within a matter of months, and for whom living abroad for years, waiting to complete the process is simply not viable. St Kitts and Nevis citizenship can be attained in as little as three months.

The major appeal of a St Kitts and Nevis passport for Chinese nationals is the ease of worldwide travel it affords. St Kitts and Nevis is an independent Commonwealth Realm, and its citizens enjoy the same level of visa-free travel to the UK, Ireland, Canada and all European Union countries as citizens of other Commonwealth Realms, such as Australia. There are two avenues through which investors and their families can acquire economic citizenship in St Kitts and Nevis. Investing between US$400,000 and US$1 million in government-approved real estate is one, though it is the least popular of the two avenues. “Property in St Kitts and Nevis is overvalued,” explains Mr Oleg Lemeshko, a consultant for immigration and second citizenship specialist, Elma Global, and only an estimated 10 percent of applicants tend to take that route, he explains. The more popular method is to make a once-off donation of approximately US$250,000 to a government approved project. Most often, this is the Sugar Industry Diversification Fund, which funds the development of industries that provide alternatives to sugar production, previously St Kitts’ dominant economy. Going the donation route also ensures a speedier process than buying real estate to acquire citizenship.

St Kitts and Nevis is gaining a reputation among Chinese nationals as the country with the most convenient second citizenship solutions. And “second citizenship”, in this case, is a particularly important feature. The country allows dual citizenship, leaving it up to clients to report – or not report – their newly acquired passport to their country of origin. For Chinese nationals who face the difficult decision of whether or not to renounce their nationality – a situation that the PRC’s refusal to recognize dual citizenship often prompts – this is often an enormous weight off their shoulders. “Our goal is to advise them accurately regarding legislation, but the final decision is up the client,” Mr Lemeshko explains.

Being granted visa free travel within the European Union is more than sufficient for a large proportion of Chinese considering residency or citizenship abroad. But for business people with close financial involvement within the European Union, a passport from an EU member state is worth a substantial amount of money. For years, the Republic of Cyprus has occupied the desirable meeting point between European Union member state and offshore financial center. From a business perspective, the jurisdictions’ benefits are manifold: residents’ worldwide income is not taxed, offshore companies can be easily incorporated, the tax rate on declared corporate profit is just 10 percent, and Cyprus has double taxation agreements with a number of countries, including China. It is unsurprising that economic citizenship sells for a premium. Apart from the requisite ownership of a permanent residence in Cyprus with a value of at least 500,000 Euros, applicants are usually required to have direct investments or assets in Cyprus in the region of 10 million Euros, making Cypriot citizenship by investment prohibitive for all but the wealthiest percentage of Chinese.

Cyprus’ introduction in 2009 of a residency by investment program has since been embraced by Chinese and other nationalities alike. The program has greatly broadened the base of investors who can take advantage of residency – and eventually citizenship – in Cyprus. Buying a personal residence in Cyprus for a minimum of 300,000 Euros is the basis for qualification in the program. Applicants are also required to have a secured international income that allows them and their family to live comfortably in Cyprus without working in the country – approximately 10,000 Euros per year with an additional 5,000 Euros per dependent. Bank balances of an unspecified amount are required too. After five years of accumulated residence – within an eight-year period – residents can apply for a Cypriot passport, and dual citizenship is recognized. 

Cyprus’ high standard of living and private English language schools both add to the appeal of living in the Mediterranean country, especially for Chinese families who place great value on an English medium education for their children. But Cyprus is, at the end of the day, worlds apart from China and, for many Chinese, finding a residency or citizenship program within Asia – where there is cultural overlap, they can live within close proximity to their extended family in China, and they speak a common language – is a priority when selecting a new home.

Thousands of Chinese consider Singapore to be the place at which their priorities intersect. The Asian city state is now the third most popular destination for Chinese millionaires to emigrate, after the United States and Canada and, as China’s high net worth individuals continue to grow in number – and the desire for wealth diversification proliferates – this number of émigrés to Singapore is will continue to climb.

Singapore’s economic stability and high quality bilingual education system have been cited as the top two motivating factors for Chinese families who consider relocating to the city state. The fact that Singapore is just a six hour flight away from Beijing and Mandarin is spoken almost everywhere automatically defines Singapore as a country where Chinese can imagine feeling at home.

Like Cyprus – and most countries with highly sought-after passports – attaining residency or citizenship in Singapore can be a costly affair. Buying property has proven the most popular means for Chinese nationals to set the wheels in motion over the past few years, during which time property purchases have reached astonishing levels. A minimum of five million Singaporean dollars (US$ 3,530,000) must be invested in Singapore for five years, and investors are required to have assets of an additional 20 million Singaporean dollars (US$14,120,000) in order for them and their family to be granted residency in Singapore. After two years of residency, Singaporean citizenship is made available. A large proportion of Chinese, however, are satisfied with permanent residency and, given that the city state does not recognize dual citizenship, they often choose to retain their Chinese passports while remaining resident in Singapore.

The property market itself has encouraged thousands of Chinese to invest in Singapore in recent years. During the first two quarters of 2011, mainland Chinese bought more private residential property in Singapore than any other group of foreigners. It was the first time they had overtaken Indonesians, Malaysians and Indians, traditionally the country’s largest foreign buyers of property. According to a private sector report, Chinese nationals bought 527 residential properties in the first quarter of 2011, followed by a record-setting 640 in the second quarter. It was enough to dominate the foreign buyers’ market: of all property purchases made by foreigners and permanent residents in Singapore, just over a quarter (26 percent) were made by Chinese nationals during the first and second quarters of 2011, according to research by global real estate adviser DZT.

In most cases, they appear to be buying properties that would be most suitable to live in. Chinese buyers already dominate Singapore’s mass market, accounting for 63 percent of property units valued at between 500,000 and 1.5 million Singaporean dollars – between US$380,000 and US$1.1 million – recent figures demonstrate. They own 32 percent of properties priced above 5 million Singaporean dollars (US$3.8 million) in central and prime districts, a trend which points directly at emigration.

Jones Lang LaSalle’s head of the residential property division, Ms Jacqueline Wong, has seen a notable rise in wealthy Chinese buying into this segment of the market. “The preference of the expatriate community is for larger four bedroom apartments of at least 2,800 square feet,” she says of the trend. “The smaller size units are not particularly attractive as the majority of middle and upper management families relocating prefer spacious four bedroom units that come with entertainment areas,” she explains.

The market is booming. Year on year figures reveal increases in resale capital values of between 2 and 2.5 percent in some regions of Singapore during the first quarter of 2011. There have also been (more modest) increases in the values of prime properties and increases in rental values, most notably for larger four bedroom units in prime districts.

When property is the primary foothold for Chinese nationals seeking the right to reside in Singapore – and, potentially, the highly desirable passport that a few years in the country awards them – the fact that the market is thriving bodes extremely well for these future residents. With heightened restrictions on buying property in China – including stricter mortgage requirements and the raising of minimum down payments for those purchasing a second home – wealthy Chinese have more reason than ever to purchase homes abroad. And, while it certainly isn’t an inexpensive path to second citizenship, few would deny that investing in Singapore’s stable economy, strong currency and resilient property market – while benefitting from an absence of capital gains tax – may be the best decision wealthy Chinese will ever make.

back to top

Core Links

China Offshore

Invest In

Contact Us

Rooms 05-15, 13A/F, South Tower,
World Finance Centre, Harbour City,
17 Canton Road, Tsim Sha Tsui
Kowloon Hong Kong