EXCLUSIVE INTERVIEW: Chinese HNW Individuals Increasingly Like The Look Of Trusts

Tom Burroughes
Group Editor in London

13 September 2012

News Analysis

Scale

The potential scale of trust-related business, barring a big slump in the Chinese economy, is large. In the Capgemini/Royal Bank of Canada report on global wealth trends, issued in June, it showed that Asia-Pacific is now the largest HNW market in the world, having overtaken North America with a HNW population growth rate of 1.6 per cent in 2011 to reach 3.37 million – a figure which signifies a growth rate of 11 per cent in two years.

But some Asians are keen to leave the region and hence will need to be able to protect their assets through vehicles such as trusts. For example, late last year it was reported that the number of wealthy Chinese trying to apply for an American green card has shot up 1,000 per cent, according to figures from the US immigration office (Source: Wall Street Journal). In 2011, some 2,969 Chinese citizens applied for the EB-5 Visa and 934 were approved. Under the programme, foreign investors must finance commercial projects in the US by investing either $500,000 or $1 million and create at least 10 full-time jobs.

One factor to consider is China’s current fixed exchange rate regime, although there are signs of liberalisation ahead. Foreign currency accounts are allowed in and out of the PRC; individuals can, among other things, remit $50,000 per annum (in addition to current account remittances). Forex rules allow people to move money abroad; however, the PRC doesn’t allow dual passports, Baker & McKenzie has pointed out.

It is not surprising that legal big-hitters such as Baker & McKenzie are drawn to the wealth planning potential of trusts for China and other Asian tigers; as it announced in its annual results, Asia continues to be one of the bright spots for revenues. The law firm has reported record worldwide fee income of $2.313 billion, up 2.1 per cent, for its fiscal year ended June 30, 2012. The biggest gains were in Latin America, but the Asian region generated single-digit increases, which is at least better than flat performances in Europe and North America. The Asia-Pacific region accounts for 28 per cent of all revenues, so there is plenty of upside potential.