How a Canadian lawyer is helping the growing number of ultra-rich looking to exit China

How a Canadian lawyer is helping the growing number of ultra-rich looking to exit China (msn.com)

 

 

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How a Canadian lawyer is helping the growing number of ultra-rich looking to exit China

Tom Blackwell

 

© Provided by National PostHelicopters carry Chinese flags over Hong Kong's Victoria Harbour on the 25th anniversary of the former British colony's handover to Chinese rule, July 1, 2022. There is a growing trend among China’s wealthy to move at least their money, if not themselves, out of the country.

 

When a Chinese-Canadian billionaire faced a closed-door trial last month, four years after being snatched from Hong Kong, the event did not go unnoticed among China’s wealthy entrepreneurs.

It was the latest sign that they could be next as Beijing pushes down on the country’s most affluent business people, says a Canadian lawyer whose unique practice focuses on building back-up plans for “ultra-high-net-worth” individuals.

 

That nervousness is fueling a growing and urgent interest in leaving mainland China or Hong Kong, says David Lesperance .

The number of very-rich business people based in the region contacting him for help in getting out has tripled in the last couple of years, he says, as President Xi Jinping consolidates power, eliminates opponents and tightens his grip on once-free-wheeling Hong Kong.

And they tend to be wealthier, often worth billions, people who had been entrenched where they were until recently.

“These are clients who realize the chances of getting caught have increased dramatically — to not a will but a when question,” said Lesperance. “That group has now for the first time really contemplated ‘I’m going to have to leave some day. There is definitely a wildfire.’”

“We’ve been very busy since the beginning of the year.”

The resulting flight of “golden geese” could be an economic boon for the countries where they land. Canada is definitely among the mix of possible destinations but governments here should do more to attract the rich fleeing China — and their fortunes, said the lawyer.

But luring such migrants is not without controversy. Ottawa’s investor immigrant program was actually cancelled in 2014 because of what the then-Conservative government said were an array of problems. Those immigrants had to fork out a relatively tiny investment, paid less taxes here, on average, than nannies, spent little time in Canada, and often learned neither English or French, critics said.

So far, China has not seen a major exodus of its richest citizens. It’s still home to 626 billionaires , second only to the United States’ 724, according to Forbes.

But Lesperance is not the only advisor noticing a growing trend among China’s wealthy to move at least their money out of the country.

Increasing numbers are parking assets in Singapore via the city state’s “family office” system, according to a survey in March by CNBC . Jenga, one of the firms that handles such transfers, told the news outlet it had seen demand double in just the previous 12 months.

Lesperance seems to come by the work honestly, having been raised in an almost borderless environment himself. A native of Windsor, Ont., his father worked in the auto industry across the river in Detroit and two of his siblings were born in a hospital there, giving them instant dual citizenship

He says his practice — which combines immigration and taxation advice — is divided about equally between clients in China/Hong Kong, the Middle East and the United States. He’s now based in Poland, where he can fit clients from multiple time zones into his daily schedule.

 

© HandoutDavid Lesperance, international tax and immigration lawyer.

Many of Saudi Arabia’s wealthy are worried about Crown Prince Mohammed bin Salman rising to the throne when his father, the king, dies. In the U.S., clients looking to decamp are divided between those who fear Democrats will boost taxes on the wealthy, and others who worry about a sharp shift to the right if the Republicans regain power nationally.

But the case of China highlights the dramatic changes Xi has wrought since coming to power in 2012, and the shifting role of business tycoons in the nominally Communist country.

Anxieties began with the 2019 proposal of an extradition treaty from Hong Kong to China, said Lesperance. It has increased as Beijing tightened the screws on Hong Kong, introducing a widely criticized National Security Law, imprisoning dissidents including media mogul Jimmy Lai and curbing the limited amount of democracy in the city’s government.

And there have been further scares on the mainland. Beijing recently quashed the thriving private-education industry and applied new pressure on the high-tech sector. Jack Ma, billionaire head of the Alibaba technology conglomerate, disappeared for months in 2020 and 2021 after he publicly criticized Chinese regulators, as an IPO for his Ant Group was suddenly axed.

Other moguls have also disappeared mysteriously . Xi’s announcement of a “common prosperity” program to more evenly spread wealth across the Chinese population has further put the very rich under pressure. Many China experts speculate that such campaigns are also about eliminating rivals to the Party’s — and Xi’s — power and control.

And then there is Xiao Jianhua , the Chinese born-and-bred Canadian citizen who was taken from his home in a Hong Kong hotel in 2017, surfacing just recently for a hasty, secretly held trial in China on unclear charges. His family in Toronto is still waiting to hear the verdict.

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The case is “often cited” by clients who fear they could similarly run afoul of the government, said Lesperance. His bottom-line advice is that they prepare in advance for just that happening, rather than wait and see if things turn bad.

“You want to prevent the problem and avoid the wildfire, as opposed to trying to put it out after your house is on fire.”

Lesperance tells clients they must focus on moving both “ass and assets” — finding a place for their money and themselves and their family. That means deciding on a new home that works both “at the board table and the breakfast table,” somewhere the children can get a good education and the entrepreneur can keep running his or her business.

Popular destinations include Australia, New Zealand, the U.K., the U.S. and this country.

To get into Canada, those wealthy migrants can set up a subsidiary of their business here and obtain work permits as corporate transfers. Provincial “nominee” programs provide a pathway to permanent residence but they’re a “dog’s breakfast,” said Lesperance.

He recommends Ottawa revive the investor immigrant class, with reforms to address past issues. That could include requiring the person to provide a clear financial benefit to Canada, a system to weed out money launderers and other “undesirables,” strict application of tax laws, and imposing a large fee to cover the cost of processing those and other applications, the lawyer said. With all of it done in a clear, timely way.

“The thing to remember is that Canada is in competition for these Golden Geese and must present an opportunity which is competitive with all the other countries which are also trying to get this group.”