Reuters has reported that the graft crackdown in China is driving wealthy Chinese out of China. “President Xi Jinping's 18-month-old drive against the pervasive graft that he says threatens the Communist Party's survival, is a fear that is even causing some officials to take their own lives,” according to the report.

Ordinary Chinese citizens can legally transfer only $50,000 overseas each year, but vast sums leak out of China using a variety of loopholes, such as funnelling money through the Chinese territory of Hong Kong, according to Reuters.

"The restrictions in China are becoming more onerous…That's triggered an increase in the amount of money that's looking to move out of China or probably is already outside of China and is looking to be spent” notes the report.

Where is the money going? The United States is the main target destination. However due to the surge in applications for the US investor visa known as the EB-5, the program has reached its yearly quota of 10,000 for the first time in its 24- year history with wait times for future applicants expected to stretch out to as long as five years or more, according to The Wall Street Journal.

Canada, which had granted visas to those who lent 800,000 Canadian dollars (US$734,245) interest-free to one of the country’s provincial governments, canned the program earlier this year but is however looking to replace it. There will be no surprise if one similar to Australia’s $5million SIV program is launched.

As such, Australia, Europe and the Caribbean are emerging as alternative destinations for China’s rich. At the end of July,  88% of the 343 such visas granted under Australia’s SIV program were to mainland Chinese, representing over A$1.7 billion worth of committed investments.

Other popular locations are Portugal, Malta, Cyprus, St. Christopher & Nevis and Antigua, all of which grant residency visas to those who buy real estate in their countries.

The journal however reports that while real-estate-for-visa programs like Portugal’s will appeal to some, Canada, the U.S. and Australia will always remain the top destinations, no matter how long the wait or cost.

Not much is reported on the level of scrutiny these governments, including Australia, have in place on investigating the sources of the funds. Current Australian legislation require applicants to demonstrate the funds are legitimate. However, the Law Council of Australia has indicated that DIBP needs to provide greater clarity on how applicants can prove their source of funds.

Sources:

https://au.news.yahoo.com/world/a/24719506/china-graft-crackdown-helps-drive-money-into-australia-property/

http://blogs.wsj.com/chinarealtime/2014/08/27/after-overwhelming-u-s-visa-program-where-will-chinas-emigrants-go-next/

http://www.lawcouncil.asn.au/lawcouncil/index.php/law-council-media/news/356-advice-on-significant-investor-visa-programme