TORONTO (Reuters) – As China passed national security law in Hong Kong last year after major protests, city residents moved tens of billions of dollars worldwide to Canada, where thousands hope to create a new future.
Capital flows out of Hong Kong banks rose to Canada reaching the highest levels recorded last year, with around C $ 43.6 billion ($ 34.8 billion) in electronic funds movements (EFT) ) is registered with FINTRAC, a Canadian counter-currency organization, which receives reports of movements above C $ 10,000.
Unprecedented outflows, the highest since 2012 when the earliest FINTRAC records are available, are the first evidence of a significant flight of overseas capital from an Asian financial hub following a security breach. .
One Canadian lender, Equitable Bank, also told Reuters that it saw an increase in Hong Kong investments just after the new law was introduced in June 2020. Critics say the law aimed at curbing dissent, an allegation rejected by Beijing which says it was necessary to strengthen national security.
The Hong Kong government has said the city has not seen major capital flows since the anti-government riots first began in 2019, when a bill was now under a shelf that allowed it to be exported to mainland China. .
The highest movements, up 46% from 2016 and up 10% from 2019, came in a year when Hong Kong police froze the accounts of several people linked to anti-democracy protests, raising concern among some residents on asset safety.
The outflows represent just 1.9% of Hong Kong’s total bank investments in 2020. However, at the same time, FINTRAC data captures only a fraction of total legal inflow into an economy Canada because there are not many transactions involved, such as transfers through cryptocurrencies, between financial institutions, or under C $ 10,000, spokesman Darren Gibb said.
The agency has seen a steady increase in overall EFT reporting, consistent with global trends, he said.
And it’s not just money.
Reuters interviewed a dozen immigration advisers, lawyers, and real estate brokers who provided a window into how many Hong Kong residents want to start a new life in Canada and take millions of dollars with them, once travel restrictions with a pandemic have ended.
Canadian visa applications from Hong Kong, excluding visitor visas, rose 10% to 8,121 in 2020, indicating the likelihood of further capital flows from the city. Britain and Australia are expected to be the other favorite destinations of Hong Kong residents.
Andrew Lo, Anlex’s chief immigration advisory officer in Hong Kong, is looking to expand into wealth management services in Canada, which he believes will be “a thriving market for new immigrants, especially from Hong Kong. ”
Lo said he has helped about 36 families emigrate to Canada in the past 12 months, each bringing in an average C $ 1.5 million.
(For a graphic of financial transfers to Canada by Hong Kong residents – here)
HONG KONG INFLOWS SWELL
Despite the money left by Hong Kong, it is still receiving inflows on a net basis, with total investments growing 5.4% in 2020 to HK $ 14.5 trillion ($ 1.9 trillion), according to Hong Kong Monetary Authority.
“As an international financial center (IFC), Hong Kong regularly handles capital inflows and outflows from all types of needs,” a spokesman for the central bank told Reuters in response to the questions. about outflows to Canada.
“This is just normal given the nature and operation of IFC.”
Strong cash flows from mainland China through the Stock Connect initiative and strong demand for some of Hong Kong’s first public offering (IPOs) last year have helped with the inflow of capital into Hong Kong, carriers -analysis and banking said.
Canada is the second home of many Hong Kong residents after their families moved to the Vancouver and Toronto areas before Britain sent their former colony to China in 1997. After gaining Canadian citizenship, many returned to Hong Kong. Kong, which is now home to about 300,000 Canadians – one of Canada’s largest overseas communities.
But following the 2020 security law, more Hong Kong residents want to make their home in Canada, which took steps here at the end of last year to make it easier for them to obtain work and permanent residence permits, according to immigration advisers and lawyers.
Residents cite eroding rights and freedoms, and better education for their children as reasons for their choice, and many are selling their properties in Hong Kong and taking their money. with them, they said.
Political developments have prompted people to consider what will happen if things go awry, and to look at Canada as an option, Canadian immigration lawyer Evelyn Ackah said. “Right now, it’s just an option. I don’t see a major exodus. He looks around, saying ‘can I be somewhere else if I have to? ‘”
(For a graphic on Canadian visa applications from Hong Kong – here)
‘MORE NOW’
Even as travel restrictions are delayed and immigration processing times are slower, some have begun to move money into Canadian accounts, according to immigration experts.
Toronto-based Fair Bank has seen a “dramatic rise” in amounts in existing accounts linked to Hong Kong phone numbers, said Mahima Poddar, head of a personal banking group.
The average balance in these accounts rose 30% between June and mid-March, compared to a 4% increase in accounts with non-Hong Kong phone numbers.
The country’s major banks did not respond to requests for inflows from Hong Kong, or declined to comment.
Jean-Francois Harvey, a Hong Kong-based Canadian lawyer who specializes in high-value immigration for high-value individuals, has seen a fivefold increase in messengers seeking a transfer. to Canada since mid-2020. Its clients have moved at least C $ 1 million and, on average, between C $ 5 million and C $ 10 million in the last 12 months.
“There has been a dramatic increase in demand especially for Canada in Hong Kong, so in the middle of COVID-19, I had to double the staff and size of the Hong Kong office,” said Harvey, worldwide managing partner of Harvey Law Group.
“This is more than a spike. This is a wave. ”
Hong Kong-based lawyer Clifford Ng, who emigrated to Canada in 1975 and returned to Hong Kong in 1995, said he has seen a fourfold increase in investigations into the tax implications. is to move to Canada.
Canada isn’t the only destination expected to see inflows from Hong Kong as residents look away, however.
The British government expects up to 321,600 Hong Kong residents to migrate there over the next five years, with nearly half of those in 2021. Based on this, the Bank of America said in January that emigration-related flows are expected to reach HK $ 280 billion ($ 36.1 billion) this year.
RACE FOR ESTABLISHMENT True
Some of the money coming into Canada is likely to flow into real estate, property advisers said.
In the first 10 weeks of 2021, Hong Kong hosted nearly a third more demonstrations of new buildings by Canadian developers than in the same period in 2019, according to data from Eli McGeever, vice president on international ownership at Soho App.
Demonstrations in 2020 impacted Hong Kong’s first wave of COVID-19 locks.
Alisha Ma, founder of immigration adviser Halcyon Counsel, said Hong Kong families are looking at properties in Toronto and Vancouver, but are waiting for permanent residence to avoid foreign buyer taxes.
Keelan Chapman, founder of the Canadian Real Estate Investment Center (HK), said it has seen a noticeable increase in buyers looking for larger buildings in school districts good for ultimate self-use, rather than just for investment.
He said many of his clients, most of whom live in Hong Kong with Canadian passports, have accelerated timelines for returning to Canada to about five years on average, from around on the previous eight years.
“There is no hurry to move back to Canada tomorrow,” he said. “It’s more of a long view.”
($ 1 = 1.2546 Canadian dollars; $ 1 = 7.7669 Hong Kong dollars)
Reciting with Sarah Wu and Nichola Saminather; Additional statement by Alun John in Hong Kong; Edited by Denny Thomas and Pravin Char