Hong Kong residents shift billions abroad
Toronto – As China imposed a sweeping national security law in Hong Kong last year after massive protests, residents of the city moved tens of billions of dollars across the globe to Canada, where thousands are hoping to forge a new future.
Capital flows out of Hong Kong banks reaching Canada rose to their highest levels on record last year, with about C$43.6 billion ($34.8 billion) in electronic funds transfers (EFT) recorded by FINTRAC, Canada’s anti-money laundering agency, which receives reports on transfers above C$10 000.
The previously unreported outflows, the highest since 2012 when the earliest FINTRAC records are available, are the first evidence of a significant flight of capital overseas from the Asian financial hub following the security turmoil.
One Canadian lender, Equitable Bank, also told Reuters it had seen a surge in deposits from Hong Kong just after the new law was introduced in June 2020. Critics say the law was aimed at stifling dissent, an allegation denied by Beijing which says it was needed to strengthen national security.
The Hong Kong government has said the city has not seen significant capital outflows since the anti-government unrest first began in 2019, when a now-shelved bill that would have allowed extraditions to mainland China was proposed.
The record transfers, up 46% from 2016 and up 10 per cent from 2019, came in a year when Hong Kong police froze the accounts of several people linked to pro-democracy protests, triggering concern among some residents about asset safety.
The outflows represent only 1.9 per cent of Hong Kong’s total bank deposits in 2020. But, at the same time, the FINTRAC data captures only a fraction of total legal inflows into the Canadian economy because many transactions are not included, such as transfers via cryptocurrencies, between financial institutions, or under C$10 000, said spokesman Darren Gibb.
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 consultants, lawyers, and real estate brokers who provided a window into how many Hong Kong residents are eager to start a new life in Canada and bring with them millions of dollars, once pandemic-induced travel restrictions end.
Canadian visa applications from Hong Kong, excluding visitors’ visas, rose ten per cent to 8,121 in 2020, indicating further capital flows from the city are likely. Britain and Australia are expected to be other favoured destinations for Hong Kong residents.
Andrew Lo, chief executive of immigration consultancy Anlex in Hong Kong, is looking to expand into wealth management services in Canada, which he believes will be “a booming market for new immigrants, especially from Hong Kong”.
Lo said he helped around 36 families emigrate to Canada in the past 12 months, each bringing C$1.5 million on average.
HONG KONG INFLOWS SWELL
Despite the cash leaving Hong Kong, it continues to receive inflows on a net basis, with total deposits growing by 5.4 per cent 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 handles capital inflows and outflows which arise from all sorts of needs on a regular basis,” a central bank spokeswoman told Reuters in response to the questions about outflows to Canada.
“This is just normal in keeping with the nature and function of an IFC.”
Robust cash flows from mainland China via the Stock Connect initiative and strong demand for some of Hong Kong’s initial public offerings (IPOs) last year have helped capital inflows into Hong Kong, analysts and bankers have said.
Canada is a second home for many Hong Kong residents after their families moved to the Vancouver and Toronto areas ahead of the British handover of its former colony to China in 1997. After obtaining Canadian citizenship, many returned to Hong Kong, which is now home to about 300 000 Canadians – one of the largest Canadian communities abroad. (Reuters)