Eroding US-China relations - among other factors - are driving more wealthy Chinese to apply for UK investment visas, new figures show. Their appetite for them also sheds light on how HNW individuals continue to propel a global market in residency and citizenship, sometimes controversially.

The number of wealthy Chinese applying to live in the UK rose by 32 per cent last year, according to Home Office figures obtained by private equity investment firm Growthdeck. The investment group said that a backlog in Chinese applying for similar status in the US has fuelled the increase, along with rule changes that have left some applicants waiting years for US approval.

At the end of September last year, the 171 ultra-hign net worth individuals from mainland China and 31 from Hong Kong applied for residency in the UK through itsTier 1 Investor Visa scheme. The progamme allows foreign nationals who invest £2 million ($2.61 million) or more into UK-registered companies and assets to obtain residency for three years and four months, with the option to extend for a further two years.

Applications from mainland China increased by 38 per cent last year, and by 7 per cent from Hong Kong (see table below), suggesting that the unrest seen in Hong Kong for much of last year has had little obvious impact; nor have reforms introduced last April in the UK requiring overseas applicants to prove ownership of their investments for at least two years.

Tier 1 Investor Visa applications from Chinese HNWs

Visas have become a route to attract investment. There is stiff competition. France, Italy and Portugal are just some that have rolled out programmes or tax breaks to attract wealthy incomers since the UK referendum result. And years before the 2016 Brexit referendum result, jurisdictions such as Malta, Portugal, Spain and the US have operated such programmes. Such visa schemes have come under political fire at times. In the UK, for example, they have been criticised for benefiting wealthy individuals and delivering relatively modest financial return for the general British taxpayer. Canada mothballed its own programme about six years ago amidst political criticism of how the scheme worked.

Advocates say these programmes provide people who might be persecuted for their wealth with options and steer revenues to small nations. Jurisdictions such as Moldova, Montenegro and a number of Caribbean island centres are among those involved. The "visa industry" even has an industry-wide body to plead its case: the Investment Migration Council, based in Geneva. One criticism, which IMC has contested, is that golden visas are a channel for money launderers.

Brexit welcome mat
Aware of where the UK casts itself next just days before official withdrawl, Boris Johnson has wasted no time changing visa rules to pivot away from the EU.

This week the government announced a new fast track visa system (starting on 20 February) to attract global talent in science, engineering and technology ahead of EU free movement coming to an end this year, leaving some R&D projects facing an uncertain future. For example, researchers from the EU currently make up around half of the UK’s 211,000 science workers.

“Fears that the UK’s Investor Visa programme would be pulled by the last UK government, and long delays when applying to the US, resulted in a surge in UK applications during 2019,” Samuel Hu, head of overseas investors at Growthdeck said. The firm traced the trend to a decision made by the US to cap its EB-5 investor programme limiting each country to 7 per cent of the 10,000 visas it grants annually. US-China trade tensions also haven't helped.

Growthdeck called the UK "an obvious secure second choice" for wealthy Chinese also helped by its “track record" of protecting investors from state seizures of assets that have been legally obtained, something investors in emerging markets are all too familiar with. Besides a discounted pound and cheaper UK assets to look foward to, the lure of the UK's private education system also can't be dismissed. "Education for children remains the top reason for Chinese HNWs and UHNWs to consider emigrating to the UK,” Hu said.