Chinese elite face price hike for Canada residencyBy Michele Penna Feb 17, 2014 2:06PM UTC
Canada has been one of the most easily accessible countries for wealthy people looking for permanent residency in a foreign land, but that is about to change. On February 12, Canadian authorities announced they have scrapped their long-standing Immigrant Investor Program. The scheme allowed permanent residency to individuals willing to loan 800,000 Canadian dollars (US$726,720) for five years at zero interest rate to one of the country’s provinces. The program had been running since 1986 and reportedly benefitted 130,000 people.
In its ‘Economic Action Plan 2014: The Road to Balance,’ the government sounds the death bell for a system which authorities say has been disappointing. According to the released document, for decades the Immigrant Investor Program “has significantly undervalued Canadian permanent residence, providing a pathway to Canadian citizenship in exchange for a guaranteed loan that is significantly less than our peer countries require.” Besides, authorities remark that there is “little evidence that immigrant investors as a class are maintaining ties to Canada or making a positive economic contribution to the country. Overall, immigrant investors report employment and investment income below Canadian averages and pay significantly lower taxes over a lifetime than other categories of economic immigrants.” In others words, the program was too cheap.
Canada is not shutting the door completely – it is just turning the screws. A brand-new Immigrant Investor Venture Capital Fund will replace the old one in order to supply “a real and significant investment in the Canadian economy.”
The government stopped accepting new applications in 2012 and, according to the Wall Street Journal, there were 81,963 applications waiting to be processed at the end of June 2013. The reason why so many applications are in a limbo is that the immigration process is – to put it mildly – very long. The Globe and Mail reported the story of a Chinese businessman who had to wait eight years to be accepted. “The process of applying to immigrate to Canada has been a struggle for my family and my business,” he told the paper, adding that he thought it a good idea to scrap the program, since it was “so painful for applicants to wait for the result.”
While the scheme was open to all participants, it is no secret that Chinese millionaires were ahead of everybody else in taking advantage of it. Of the tens of thousands applications mentioned by the Wall Street Journal, 70 per cent were filed in Hong Kong. The decision to get rid of it came only days after the South China Morning Post published a report on how wealthy mainland applicants “overwhelmed” the Canadian Consulate in the former British colony.
Recent reports show that affluent Chinese are very willing to move out of their homeland. According to a January survey by Hurun Report – a publishing and events group which focuses on the rich part of China’s society – 64 per cent of the Chinese wealthy elite are emigrating or planning to do so, up 4 per cent from 2013.
The number is staggering, especially when one takes into account China’s growth, which, although slowing, is still impressive by any standard. Behind the trend are the expected culprits: pollution, the search for better education and medical treatment, and an overall sense of safety which other places are supposedly able to provide. According to Hurun Report, many are likely to be keeping an exit door open rather than fleeing altogether, as only 15 per cent are thinking of giving up their Chinese nationality (China does not allow double passports: you take your Chinese nationality or you leave it.)
As Canada makes it more difficult to buy a local residency, potential emigrants may start looking for alternatives. Provided that they have cash to spend that should not prove too difficult: in recent years a growing number of countries are trying to woo affluent individuals – often, it seems, with China in mind – into buying residency. One example is Spain, which in 2012 announced a plan give foreigners Spanish residency provided that they buy houses worth at least 500,000 euros ($684,000). Madrid’s goal is reviving the real estate market, which suffered a tremendous crash in the aftermath of the financial crisis. Australia, too, is on the lookout for “high net worth individuals,” as the government officially dubs significant investors. But their pockets must be very deep: to apply for a residency visa you need to invest at least 5 million Australian dollars ($4,500,000).