Overseas business investment opportunities are increasingly attractive to China's wealthy.

• According to asset managers and consultants, China's wealthy are seeking business opportunities abroad instead of just investment returns.
• There has been a notable increase in requests from Chinese family offices seeking to purchase smaller businesses in Japan, according to Ryota Kadogaki, co-founder and global CEO of Monolith, a consulting firm for family offices based in Japan.
• According to Grant Pan, CFO of Noah Holdings, the majority of their clients are entrepreneurs from China who seek to expand their businesses globally.

Beijing - China's wealthy are increasingly seeking to move capital abroad in pursuit of business opportunities, rather than solely focusing on investment returns, according to asset managers and consultants.

There has been a notable increase in requests from Chinese family offices seeking to purchase smaller businesses in Japan, according to Ryota Kadogaki, co-founder and global CEO of Monolith, a consulting firm for family offices based in Japan.

He mentioned that he is also learning Chinese and considering hiring Chinese speakers in his company due to the slower growth in China and a weaker Japanese yen. Despite the recent strengthening of the Japanese yen to around 20 yen versus the Chinese yuan, it is still weaker than the 15 level seen in 2020.

During the January to July period, the non-financial direct investments of investors from mainland China overseas increased by 16.2%, totaling $83.55 billion. This investment covered over 6,100 businesses in 152 countries and regions, according to the Ministry of Commerce.

"According to Grant Pan, CFO of Noah Holdings, most of their clients are entrepreneurs from China who are seeking to expand their businesses globally. These entrepreneurs are keeping an eye out for opportunities worldwide, despite the slowdown in domestic markets for many industries."

""Our clients seem to be busier now as they travel more frequently while exploring new markets, giving them a better global perspective on allocation," he stated."

Nearly 16,800 overseas clients were registered with Noah Holdings as of June, representing a 23% increase from the previous year. Additionally, the company's active overseas clients saw a 63% year-on-year increase to 3,244.

While overseas assets under management increased by nearly 15% to $5.4 billion from the previous year, mainland China assets under management decreased by over 6% to $15.8 billion, according to Noah's quarterly earnings report.

Affluent Chinese have long looked for alternative ways to grow wealth outside the country due to Mainland China's tight control on capital with an official limit of $50,000 in overseas foreign exchange a year.

Chinese investors can move their assets abroad by purchasing foreign companies, as Kadogaki pointed out. He also provided examples of how a fund investing in a tech company in China might consider acquiring a retail store in Japan to increase potential revenue.

In June 2023, Kadogaki announced that his company began collaborating with Canopy, a Singapore-based wealth management software company with numerous China-related funds, to facilitate their entry into the Japanese market. "We can serve as a bridge for their clients to invest in Japan," he stated.

Currently, Canopy states that its system is capable of supporting English, simplified and traditional Chinese, and German. The company asserts that it collaborates with over 300 custodians who manage more than $160 billion in assets under reporting.

A 'rational' shift after the post-Covid rush

"According to Mu Chen, executive director at Canopy, the fastest growth in interest from Chinese clients occurred in the post-Covid period to early last year, as reported by the professionals who manage the money for wealth owners."

"In 2022 and 2023, it was more of a reactionary behavior to consider traveling abroad. However, now, it is becoming more rational and is focused on families planning their assets, businesses, and families globally using Hong Kong or Singapore as a base to expand their reach."

Many Chinese companies have accelerated their global expansion in recent years, driven by slower domestic growth following years of rapid expansion. As a result, this interest in moving their wealth abroad to tap business opportunities has arisen.

In contrast to how earlier Chinese entrepreneurs primarily focused on exporting Chinese-made goods or acquiring overseas real estate, the current generation of entrepreneurs is exploring new opportunities in global markets.

Noah Holdings' Pan stated that many of the company's wealthy clients have established offices and alternative living spaces in Hong Kong, Singapore, or Japan to explore international business opportunities while maintaining proximity to China operations.

"Entrepreneurs often blur the line between business and family, using their wealth to fund both, according to Pan."

The demand for private, international travel among affluent Chinese residents is increasing as they seek to expand their business ventures globally.

Private long-range aircraft are in demand among Chinese conglomerates operating in Southeast Asia, the Middle East, and Africa, according to Paul Desgrosseilliers, general manager at ExecuJet Haite General Aviation Services.

ExecuJet Haite opened a maintenance, repair and operations center for private jets at Beijing Daxing International Airport on Aug. 27. The largest center for business aviation in Asia Pacific, it can access a designated channel at the airport for international immigration processing and customs.

Tackling slower growth

According to Desgrosseilliers, international business jet flights at ExecuJet Haite's facilities in Beijing Capital Airport and Tianjin have partially recovered, but not yet to pre-pandemic levels.

Chinese consumer demand has decreased, as noted by major U.S. and Chinese corporations in their second-quarter earnings.

While the trend of affluent Chinese expanding their businesses globally is growing, not all families will choose to do so, according to Canopy's Chen. He gave the example of a family-owned seasoning products business in China, whose founder is approaching retirement, and who did not feel the need to globalize their business or wealth planning.

"Entrepreneurs who are newer generations' founders think more globally about their business."