Tuesday, Feb. 11 was a bad day for Chinese millionaires seeking a quick, cheap route to a new life in a foreign country. Canada, which had issued some of the world’s least expensive “investor” visas, decided not to do so anymore. The terms of the Canadian program had been unbeatable: in exchange for an interest-free, five-year C$800,000 (US$732,000) loan to the Canadian government, an applicant with C$1.6 million ($1.46 million) in assets could, along with his or her dependents, receive permanent residency status, with the option of citizenship in three years.
Of the approximately 185,000 migrants who have taken advantage of Canada’s Immigrant Investor Program since the mid-1980s, roughly half originated from China and Hong Kong. It was a good deal for the migrants -- and for Canada, too. According to Hong Kong's South China Morning Post, approximately 67,000 Mainland Chinese, and 30,000 Hong Kongers, have emigrated to Canada since the program’s inception in the mid-1980s. The program brought in billions of dollars of investment and -– more crucially –- Chinese and Hong Kong entrepreneurs who filled employment niches and supported local economies (especially real estate markets).
Of course not all of those Chinese migrants made for great Canadians. Many simply fueled a wave of “reverse migration,” taking their new passports and moving back to Asia, often leaving their spouses and children behind. The SCMP reports that there are currently 295,000 Canadian citizens living in Hong Kong alone. The Canadian government’s desire to end such a liberal giveaway is in this light perfectly understandable.
Yet what really seems to bother the Canadians isn’t the migrants' unwillingness to integrate, but rather a sense that Canada had sold out too cheaply. Finance Minister Jim Flaherty summarized this sentiment in his annual budget message last week: “For decades, [the investor scheme] has significantly undervalued Canadian permanent residence, providing a pathway to Canadian citizenship in exchange for a guaranteed loan that is significantly less than our peer countries require.”
Flaherty may have been thinking of Australia, which in 2012 established a "Significant Investor Visa" -- a four-year visa that can eventually be converted into a permanent one in exchange for a A$5 million ($4.51 million) investment in the country. The Australian program certainly brings in more investment per migrant. But if the goal of encouraging immigration is to diversify and turbocharge an economy, if not a culture, seeking out only the wealthiest of Chinese investors (and 91 percent of the 545 applicants to Australia’s Significant Investor Program are Chinese) seems a poor way to do it.
To be sure, Chinese capable of affording the Canadian program were far from poor. But compared to those who can afford the Australian program they represent an entrepreneurial class far more likely to benefit the Canadian economy. Similarly, they’re likely to go somewhere else now that Canadian citizenship isn’t so easily available to them. (Portugal, for example, hands out visas for €500,000 real estate purchases.) A 2011 survey conducted by Bank of China and the Hurun Report, a research organization focused on Chinese wealth, found that among 980 Chinese with assets exceeding $1.6 million, 14 percent had already emigrated or were in the process of doing so, while an additional 46 percent were considering it. Similarly, a 2011 Private Wealth Report on China published by China Merchants Bank and Bain & Company revealed that among Chinese worth more than RMB 100 million ($16.45 million), 27 percent had already emigrated, and 47 percent were considering it.
From a financial perspective, that’s a lot of investment for the Canadian government to leave on the table -– even if it’s not nearly as much as the Australians theoretically might be getting. Indeed, as of January 2013, 45,500 investor visa applications were hung up in Hong Kong, representing roughly C$7.5 billion ($6.85 billion) in untapped interest-free loans to the Canadian government. That money is now bound for other countries, or is simply parked in China and Hong Kong, along with the people who earned it.
Meanwhile, the Canadian government claims to be busy devising a new investor visa program that will ensure that “immigrants who come to Canada deliver meaningful benefits to our economy.” Whatever that new program looks like, it almost assuredly means fewer economic immigrants. It's hard to see how that benefits any economy, much less Canada’s.
(Adam Minter is a regular contributor to Bloomberg View based in the Shanghai and the author of “Junkyard Planet,” a book on the global recycling industry. Follow him on Twitter at @AdamMinter.)
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