Instead of high net worth individuals, high-level executives in China are increasingly using commercial aircraft, said Paul Desgrosseilliers, general manager of ExecuJet Haite General Aviation Services. The company opened a new service center at Beijing Daxing International Airport on August 27, 2024.
ExecuJet Haite
BEIJING — China's wealthy are increasingly looking for ways to move capital outside the mainland to pursue business opportunities, rather than simply seeking investment returns, according to asset managers and consultants.
This year, there has been a “very significant” trend of requests from Chinese family offices looking to acquire smaller companies in Japan, said Ryota Kadogaki, co-founder and global CEO of Monolith, a family office consulting firm based in Japan.
“I'm also studying Chinese and I'm thinking of hiring Chinese-speaking people in my company right now,” he said, noting that slower growth in China and a weaker Japanese yen are supporting the growing interest. Even with the recent strengthening to around 20 yen against the Chinese yuan, it is still weaker than the 15 level seen in 2020.
Mainland-based investors increased their non-financial direct investments abroad by 16.2% to the equivalent of $83.55 billion During the January-July period, according to the Ministry of Commerce, investments covered more than 6,100 companies in 152 countries and regions.
“Most of our clients are China-based entrepreneurs looking to go further global,” Grant Pan, chief financial officer of China-based wealth management firm Noah Holdings, told CNBC. “Obviously, they are at least keeping an eye on opportunities for their businesses around the world. Obviously, there is deceleration pressure in terms of domestic markets for many industries.”
“Many of our clients seem to be busier than before,” he said. “As they are exploring new markets, they are traveling more frequently, which more or less gives them a better perspective on global distribution.”
Noah Holdings said the number of its clients registered abroad The number of the company's active overseas customers increased by 23% year-on-year to nearly 16,800 at the end of June. The number of active overseas customers increased by almost 63% year-on-year to 3,244.
Assets under management overseas rose nearly 15% to $5.4 billion from a year earlier, while assets under management in mainland China fell more than 6% to $15.8 billion, according to Noah's quarterly earnings report.
Mainland China maintains strict controls on capital, with an official limit of $50,000 in foreign currency per year. This means wealthy Chinese have long sought alternative ways to increase their wealth outside the country.
Kadogaki noted that buying foreign companies is a way for Chinese investors to shift assets overseas. He also shared examples of how a fund investing in a tech company in China might now try to acquire a retail store in Japan to expand its potential revenue.
In June 2023, Kadogaki said his company began working with Canopy, a wealth management software company based in Singapore. “We are working with many China-related funds to help them localize in Japan. We can be a gateway for their clients to invest in Japan,” he said.
Currently, Canopy says its system supports English, Simplified and Traditional Chinese, and German. The company says it works with more than 300 custodians with more than 160 billion dollars in assets under report
A “rational” change after the post-Covid fever
“We usually deal with professionals who help manage wealth owners' money,” said Mu Chen, CEO of Canopy. “What we are hearing from them is that The fastest growth in terms of interest from Chinese customers [occurred] in the post-Covid [period to] “early last year.”
“In 2022 and 2023, maybe thinking about going overseas has been more of a reaction,” he said. “I think it's now becoming more rational and more about these families planning not just their assets globally, but planning their assets, their businesses and their families globally using Hong Kong or Singapore as a base to look more outward.”
This interest in moving their wealth abroad to take advantage of business opportunities comes at a time when many Chinese companies have accelerated their global expansion in recent years. This is largely due to slower domestic growth, after years of rapid expansion.
This contrasts with the way an earlier generation of Chinese entrepreneurs tapped into global markets by simply exporting goods made in China or acquiring real estate abroad.
Noah Holdings' Pan noted that many of the company's wealthy clients have set up alternative offices and residences in Hong Kong, Singapore or Japan as a way to explore global business opportunities while maintaining proximity to operations in China.
“Many entrepreneurs don't have a clear distinction between business and family,” Pan said. “They make their wealth by operating these kinds of businesses and sometimes inject capital back into them.” [to the family.]”
Attempts by wealthy Chinese residents to increasingly tap into global markets can also be seen in the demand for private and international travel.
“Whether it's Southeast Asia, the Middle East or Africa, there's been huge growth in these areas for Chinese conglomerates, so I think executives in China have a need to take advantage of that.” [private] “We see a lot of flights going there,” said Paul Desgrosseilliers, general manager of ExecuJet Haite General Aviation Services, which operates maintenance centers for private planes..
As part of a multi-year plan, ExecuJet Haite opened a maintenance, repair and operations center for private jets at Beijing Daxing International Airport on August 27. The center, which claims to be the largest for commercial aviation in Asia Pacific, can access a designated channel at the airport for international immigration and customs processing.
How to deal with slower growth
Desgrosseilliers said international flights on commercial jets via other ExecuJet Haite facilities at Beijing Capital Airport and in Tianjin have recovered, but not yet to pre-pandemic levels.
The trend of wealthy Chinese looking to expand their businesses globally is still in relatively early stages and not all families will choose to do so overseas, Canopy's Chen said. He cited the case of one family from a seasoning products company in China, whose founder is aging, who felt no need to globalize their business or their estate planning.
“As founders of the new generations, entrepreneurs think more globally, they also think [about] “Your business at a more global level.”