Capital Flight and Brain Drain: Is China in as Much Trouble as Russia?

No. China’s numbers may be worse than Russia’s, but China has a lot more talent and capital to lose than Russia. In the end, China will eat Russia’s lunch (Siberia).

Over the last few years, the situation has become worse. Bain & Company, a global management consulting firm, has in conjunction with China Merchants Bank, published three reports on the emerging wealth market in China and the likelihood of emigration.

The first report, issued in 2009, found that wealthy Chinese use offshore investments primarily “to finance immigration, send their children to study abroad or avoid domestic regulations”.

The next report, in 2011, disclosed that “10 per cent of the wealthiest have decided to leave the country” while another 10 per cent “have plans of doing so and the rest are still considering it”.

The latest report last year found that “among those mainland business owners who possess more than 100 million yuan (RM52 million), 27 per cent have already emigrated, while another 47 per cent are considering leaving.”

Other reports confirm the trend. A survey by the Bank of China and Hurun Report, which ranks the wealthiest individuals in China, found that more than half of the country’s millionaires are considering emigrating or are already in the process of doing so. _China Capital Flight

That is a lot of fleeing millionaires, but then China can afford to lose a lot of millionaires. China’s population is full of intelligent and ambitious would-be millionaires — unlike Russia, whose lower average IQ and economically-inept population will find it difficult to make up for its ongoing loss of capital, business expertise, and talent.

China is as belligerent to its neighbors as Russia, making enemies almost as fast as Putin is doing.

China has refused to abide by any international agreements when it comes to their claims on nearly all the South China Sea. As far as China is concerned the area is owned by China and China will seek to establish control over it all as peacefully as possible. As China deploys more military forces to the South China Sea it is clear that China is preparing to confront and scare off, or fight, any armed opposition. So far there has been opposition, but not heavily armed opposition. Thus far China’s bully and intimidate tactics are working.

Meanwhile the Chinese aggression in the South China Sea has created a widespread belief that war is not only possible but imminent. _StrategyPage

China’s immediate belligerence appears to be directed mainly toward neighbors who might contest China’s rights to claim and exploit a wider range of territories than it can claim by international treaty.

Russia’s rush to war in Eastern Europe is stoking its own brain drain and capital flight. And Russia has much less talent that it can afford to lose than China. As Russia steadily loses influence to China in its own backyard — and as the ethnic Russian population shrivels away by the decade — it would be difficult for China to match the rate of decline of the Russian bear under Putin.

More: Is Russia Getting Its Money’s Worth from Putin?

Russians Seeking Political Asylum from Putin: Fleeing to Kiev to Escape Russia’s Neo-Fascism

According to the U.N., about 40,000 Russians asked for political asylum in 2013, the largest number of any country except for Syria. Some go to Europe, or even India or Thailand. Russian is now a common language on the streets of Dubai.

But for a certain kind of Russian, Kiev now holds a particular attraction.

… Since the invasion and occupation of Crimea, several million Russians have been forbidden to leave the country. These include employees of the Interior Ministry, Defense Ministry, Federal Prison Service, Prosecutor General’s Office, and Federal Migration Service, among others. In total, about 4 million government employees are now unable to travel abroad. Few if any of them—secretaries, clerks, drivers, lawyers—possess anything resembling a state secret. The purpose of the ban is rather to prevent Russians from seeing that the outside world is attractive in any way, and to keep them loyal to the regime at home.

How are they going to keep them in bloody Russia, once they’ve had a taste of the civilised world?

More — Will China learn from Putin’s mistakes?

Much as Putin’s aggressive Russian nationalism has alienated much of the Russian and post-Soviet periphery, so will China’s current ideology of nationalist grievance and resentment. Even North Korea and Myanmar, precisely the kind of repressive autocracies that should be comfortable with Beijing, have tacked away from it as they have increasingly realized that “alliance” with China means subordination in practice. __

Probably not in the short term.

Update Oct2014: China’s economic boom shakes the old political system to its roots

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