A Chinese financial industry professional in Shanghai who regularly speaks to China Economic Review became a Singapore resident two years ago. “It was pretty easy,” he said. “You just have to invest a bit of money.”
Earlier this year he applied to become a Hong Kong resident as well. The Singapore residency is important as it allows the man to take advantage of Hong Kong’s immigration and investment program. Under this program, Chinese nationals who already have residency rights overseas may immigrate to Hong Kong on the condition that they invest around US$839,000 in the SAR.
This financial industry professional wants to buy an apartment in Hong Kong, and he is considering moving his wife and daughter to the territory in the interests of his daughter’s education.
So far this year, US$477.3 million has entered the Hong Kong property market via the immigration and investment program. Add in the myriad other ways of moving money from the mainland to Hong Kong – overseas business accounts, doctoring procurement contracts, pooling money from family members, carrying in suitcases full of cash – and you have a compelling reason why housing prices in the territory have risen 30% since January.
The immigration and investment program is a legitimate way around Beijing’s capital controls, but many of the others are not. This hasn’t stopped the money flowing in from the mainland, though. Thanks to stimulus spending and massive credit expansion, there is plenty of Chinese liquidity to seep into Hong Kong.
Takings at Macau’s gaming tables are also held up as indicator of these robust under-the-table outflows – despite Beijing tightening the visa policies for mainland visitors. Macau casino revenues fell 12% year-on-year in the first half but rebounded to post a monthly-record performance in August.
The revival has been sufficient to revive casino expansion programs that were put on hold during the financial crisis. But it wasn’t enough to propel Sands China, which operates Macau’s three Las Vegas Sands casinos, towards the US$3.4 billion it wanted to raise through its Hong Kong initial public offering. The company had to settle for US$2.5 billion.
When marketing the offering, Sheldon Adelson, chairman of Las Vegas Sands, said that the scale of his company’s business model put it in a different league from the likes of Wynn Macau, which has seen its shares fall 7% since listing in October. As far as investors are concerned, however, Adelson’s ambitions – and the mountain of debt that underpins them – involve no small amount of risk.
The 1,000-plus gaming tables and 3,600 slot machines under the Sands China brand account for 24% of Macau’s total gaming revenues. The plan is to add 20,000 hotel rooms to the existing stock of 3,500 as well as vast swathes of convention and retail space. Fine for the long haul, perhaps, but will demand be able to meet supply (in an already crowded market) in the nearer term?
Investors aren’t comfortable placing bets while the Chinese government – which, through its visa policies, controls the growth of Macau’s largest potential customer base – refuses to show its hand.