Hong Kong residents transferred billions to Canada after China imposed sweeping national security law

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Hong Kong residents transferred billions to Canada after China imposed sweeping national security law


The Hong Kong skyline, May 28, 2020.

TYRONE SIU / Reuters

As China imposed a sweeping national security law on Hong Kong last year after massive protests, the city’s residents have transferred tens of billions of dollars across the globe to Canada, where thousands hope. forge a new future.

Capital flows from Hong Kong banks to Canada hit an all-time high last year, with an estimated C $ 43.6 billion ($ 34.8 billion) in electronic funds transfers (EFTs) registered by FINTRAC, the Canadian anti-money laundering agency, which receives reports on transfers over 10,000 Canadian dollars.

Previously unreported cash outflows, highest since 2012 when FINTRAC’s first records became available, are the first evidence of a significant outward flight of capital from the Asian financial hub following the turmoil of security.

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A Canadian lender, Equitable Bank, also told Reuters it saw an increase in deposits from Hong Kong just after the new law was introduced in June 2020. Critics say the law was intended to stifle dissent, a claim denied by Beijing which says it necessary to strengthen national security.

The Hong Kong government said the city had not seen any significant capital outflows since the anti-government unrest began in 2019, when a now-shelved bill that would have allowed extraditions to mainland China was offers.

The record transfers, up 46% from 2016 and 10% from 2019, came a year when Hong Kong police froze the accounts of several people linked to pro-democracy protests. which has raised concerns among some residents about the safety of assets.

Outflows represent only 1.9% of total Hong Kong bank deposits in 2020. But, at the same time, FINTRAC data only captures a fraction of total legal inflows into the Canadian economy, because of many transactions are not included, such as transfers via cryptocurrencies. , between financial institutions, or less than CAN $ 10,000, said spokesperson Darren Gibb.

The agency has seen a steady increase in global reporting on EFT, in line with global trends, he said.

And it’s not just money.

Reuters interviewed a dozen immigration consultants, lawyers and real estate brokers who provided a window on how many Hong Kong residents want to start a new life in Canada and bring in millions of dollars, once travel restrictions induced by the pandemic will end.

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Canadian visa applications from Hong Kong, excluding visitor visas, rose 10% to 8,121 in 2020, indicating that new capital flows from the city are on the rise. probable. Britain and Australia are expected to be other preferred destinations for Hong Kong residents.

Andrew Lo, managing director of immigration consulting firm Anlex in Hong Kong, is looking to expand into wealth management services in Canada, which he says will be “a booming market for new immigrants, especially newcomers. Hong Kong ”.

Lo said he has helped around 36 families emigrate to Canada in the past 12 months, each bringing in C $ 1.5 million on average.

HONG KONG INFLOWS SWELL

Despite cash leaving Hong Kong, it continues to receive inflows on a net basis, with total deposits increasing 5.4% in 2020 to HK $ 14.5 trillion ($ 1.9 trillion), according to the ‘Hong Kong Monetary Authority.

“As an international financial center (IFC), Hong Kong regularly handles the inflows and outflows of capital that arise from all kinds of needs,” a central bank spokesperson told Reuters in response to questions about outflows. Canada.

“This is just normal, given the nature and function of an IFC.”

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Robust cash flow from mainland China through the Stock Connect initiative and strong demand for some of Hong Kong’s IPOs last year have helped capital inflows to Hong Kong, said investors. analysts and bankers.

Canada is a second home for many Hong Kong residents after their families moved to the Vancouver and Toronto areas before the British transfer from its former colony to China in 1997. After obtaining Canadian citizenship, many are returned to Hong Kong, now home to approximately 300,000 Canadians – one of the largest Canadian communities abroad.

But as a result of the 2020 Security Act, more Hong Kong residents want to move to Canada, which took steps late last year to make it easier for them to obtain work permits and permanent residence, according to immigration consultants and lawyers.

Residents cite the erosion of rights and freedoms and better education for their children as the reasons for their choice, and many are selling their properties in Hong Kong and bringing their money with them, they said.

The political developments have made people think about what would happen if things deteriorate and consider Canada as an option, said Canadian immigration lawyer Evelyn Ackah. “At the moment, this is only an option. I don’t see a massive exodus. These are people looking around and saying, “Can I be somewhere else if I need to? “”

‘MORE THAN A SPIKE’

Even though departures are being delayed by travel restrictions and slower immigration processing times, some have already started transferring money to Canadian accounts, immigration experts say.

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Toronto-based Equitable Bank has seen a “remarkable increase” in existing account balances linked to Hong Kong phone numbers, said Mahima Poddar, head of the personal banking group.

Average balances on these accounts rose 30 percent between June and mid-March, compared with a 4 percent increase in accounts with phone numbers other than Hong Kong.

The country’s major banks did not respond to requests or declined to comment on inflows from Hong Kong.

Jean-François Harvey, a Canadian lawyer based in Hong Kong and specializing in immigration for wealthy people, has seen the number of clients seeking to settle in Canada multiply by five since mid-2020. Her clients have transferred at least C $ 1 million and more often between C $ 5 million and C $ 10 million in the past 12 months.

“There has been an incredible increase in demand, especially for Canada in Hong Kong, so much so that in the midst of COVID-19, I had to double the team and the size of the office in Hong Kong.” , said Harvey, global managing partner of Harvey Law Group.

“It’s more than a peak. It’s a wave.

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Hong Kong-based lawyer Clifford Ng, who himself immigrated to Canada in 1975 and returned to Hong Kong in 1995, said he had seen four times as many inquiries about the tax implications of a move to Canada.

Canada is not, however, the only destination to receive flows from Hong Kong as residents seek to leave.

The UK government expects 321,600 Hong Kong residents to migrate there over the next five years, nearly half of them in 2021. On that basis, Bank of America said in January that it expects this to happen. that emigration-related outflows reach HK $ 280 billion. ($ 36.1 billion) this year.

RACE FOR REAL ESTATE

Some of the money coming into Canada will likely be spent on real estate, real estate consultants have said.

In the first 10 weeks of 2021, Hong Kong hosted nearly a third more new property shows by Canadian developers than in the same period in 2019, according to data from Eli McGeever, vice -President of International Property at Soho App.

Exhibits in 2020 were affected by the first wave of COVID-19 lockdowns in Hong Kong.

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Alisha Ma, founder of immigration consultancy Halcyon Counsel, said Hong Kong families search for properties in Toronto and Vancouver, but wait until they are granted permanent residence to avoid taxes from foreign buyers .

Keelan Chapman, founder of the Canadian Real Estate Investment Center (HK), said he has seen a noticeable increase in the number of buyers looking for larger properties in good school zones for possible personal use, rather than only for investment.

He said many of his clients, most of whom are Hong Kong residents with Canadian passports, have accelerated return times to Canada to about five years on average, down from about eight years previously.

“There is no rush to come back to Canada tomorrow,” he said. “It’s more of a long sight.”

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