When it comes to China and the global business climate, the country offers a strong manufacturing infrastructure, access to supply chains, and an abundance of technology talent that has lured many multinational companies into its borders. But what was once a highly desirable destination for entrepreneurs has declined in rather dramatic fashion. This has resulted in many businesses leaving China to find more favorable locations… and many of China’s wealthiest entrepreneurs looking abroad as well. From China’s COVID restrictions to private sector assault, many believe the time to escape is now.
When it comes to choosing an alternative destination, businesses leaving China have considered several other countries. This has been noted in the manufacturing sector among tech firms. But other entrepreneurs are similarly exploring new areas of the world to set up shop. China seems to be recognizing these trends, which may in part be why China’s COVID restrictions were recently relaxed. But these changes may well be too little, too late, when it comes to persuading wealthy businesses and entrepreneurs to stay. Other opportunities exist, and many see them as much safer and possibly more lucrative.
“When you don’t have a say in how a government makes rules, you don’t have to stay there. There are many other places where you can do things.” – Aginny Wang, Co-founder of Flashwire, a cryptocurrency firm
Triggers for Businesses Leaving China
Over the last few decades, it seemed China embraced a more entrepreneurial environment within its borders. Multinational corporations were allowed to enter and compete within the country. Likewise, Chinese domestics could explore creative ways at competition and in innovative product development. Combined with a robust manufacturing infrastructure and supply chain network, China had much to offer an entrepreneur. But that has since changed over the last several years. Certainly, the pandemic and China’s COVID restrictions handcuffed many businesses. But at the same time, the private business sector has been the target of some unfair regulations and policies.
Well after the rest of the world relaxed pandemic precautions, China continued to have a zero COVID policy. This not only led to severe supply chain delays but likewise manufacturing and production halts. This has stimulated greater competition in manufacturing with other countries. At the same time, the Chinese Communist Party made some notable changes that undermined private enterprise. Cryptocurrency was banned in the country, and many industries had to suddenly deal with new regulations. Some of the largest industries in the country suffered the brunt of these shifts. This is what began to worry many wealthy entrepreneurs and businesses. Thus, between China’s COVID restrictions and these aggressive shifts, the number of businesses leaving China began to grow.
“The entrepreneurs are still pessimistic. As long as people are worried about their assets, they’ll register their companies in Singapore and put their money here.”- J.C. Huo, Founder of Lotusia and Advisor for Foreign Visas and Business Registrations in Singapore
New Landing Spots for Chinese Wealthy
When it comes to finding an alternative place to call home, businesses leaving China have settled on a few different spots. Common ones appear to be Dubai, Malta, London and Tokyo. Bu the most popular choice in escaping China’s COVID restrictions and shifting regulations is Singapore. Despite being small, expensive, and limited in employee talent, it has become the clear hotspot of choice. In fact, four of the top wealthiest Chinese entrepreneurs now live in Singapore. And the Chinese influx has mostly been those in tech fields like gaming, fintech and crypto.
Notably, Singapore has much to offer Chinese entrepreneurs. For businesses leaving China, the language barrier is less in Singapore with 75% being Chinese and most speaking Mandarin. It is also globally focused and friendly to entrepreneurs and new businesses. And unlike China’s COVID restrictions and threatening government climate, it honors its existing laws and rules. While Hong Kong used to be the preferred destination, Chinese control and changes there have soured opinions. Instead, entrepreneurs now favor Singapore as a better safe haven beyond the reach of the Chinese government.
“Now that [Xi Jinping] is firmly in place … I have already received three ‘proceed’ instructions from various ultra-high net worth Chinese business families to execute their fire escape plans.” – David Lesperance, Europe-based Attorney Facilitating Chinese Family Immigrations
More Than Restrictions in COVID and Commerce
Believe it or not, thoughts about exiting China didn’t just start in recent months. For many of the wealthy business owners in the country, plans for escaping started as much as 2 years ago. As the rest of the world began relaxing health policies related to the pandemic, China’s COVID restrictions tightened. Even the wealthiest had to still deal with the inconveniences these policies brought. Supply chain disruptions, lack of access to talent, and commercial delays were part of a global meltdown in trade. This was the initial stimulus for businesses leaving China, and many entrepreneurs started to consider other options.
(China’s latest COVID meltdown can only hurt world trade–read why in this Bold story.)
But while China’s COVID restrictions hampered business-as-usual, the bigger threat involved personal safety. In recent months, several high-profile business individuals dropped out of the spotlight. Jack Ma of Alibaba is perhaps the most notable. But others include financier Xiao Jianhua and real estate mogul Whitney Duan. Many suspect the Chinese Communist Party to be behind these disappearances and are concerned about future actions. Some anticipate a wealth tax that could further hurt their assets and net worth. Others fear even more targeted action by authorities directed against their businesses and families. These issues are accelerating recent trends to exit the country by the business wealthy.
Too Late for Change?
It’s worth noting that China is aware of the current exodus of wealth and talent in the country. In part, this is why China’s COVID restrictions were recently lifted in a rather sudden fashion. At the same time, China could extend promises and guarantees to businesses and entrepreneurs to appease their fears. But will this prevent businesses leaving China to reverse course? Probably not. Faith in such promises is at an all-time low, and the grass looks greener in other destinations. These are the same reasons that companies like Apple are looking to Vietnam and India as alternatives to Chinese manufacturing. China will likely look to change its ways in an effort to deter more businesses from exiting. But the emigration has begun, and it will take a great deal of persuasion to win them back.
