STEVE HESS

The Flight of the Affluent in Contemporary China

Exit, Voice, Loyalty, and the Problem of Wealth Drain
ABSTRACT

This article investigates why a growing number of wealthy Chinese, the primary
beneficiaries of Chinas economic rise, have opted to exit China, through both capital
flight and emigration, over the last decade, instead of using voice, engaging the
political process, and leveraging their power and influence to effect policy change.
K E Y W O R D S : China, migration, class, authoritarianism, capitalism

INTRODUCTION

Over the last three decades, China has seen growing socioeconomic inequality and the concentration of national wealth among a relatively small group of
economic elites. In 2012, Chinas National Bureau of Statistics reported that
the countrys Gini coefcient was at 0.474, lower than its peak of 0.491 in
2008, but higher than the UNs warning level for social unrest of 0.40 and
much higher than in the mid-1980s, when Chinas Gini coefcient still fell
below 0.30.1 Independent researchers have even suggested that the rate of
STEVE HESS is an Associate Professor of Political Science and East Asia and Pacic Rim Studies at the
University of Bridgeport, Connecticut, USA. His primary research interests include contentious
politics in authoritarian regimes and Chinese foreign policy in Africa. He is the author of Authoritarian Landscapes: Popular Mobilization and the Institutional Sources of Resilience in Nondemocracies
and Charting the Roots of Anti-Chinese Populism in Africa (co-authored with Richard Aidoo). This
research was funded through a Republic of China Ministry of Foreign Affairs Taiwan Fellowship.
The author thanks the Institute of International Relations at National Chengchi University and the
Center for Chinese Studies at the National Central Library in Taiwan for their support. He also
thanks Shengping Chang, Salvatore Babones, I Yuan, Arthur Ding, and Pascal Abb for helpful
feedback. Email: <shess@bridgeport.edu>.
1. World Bank, World Development Indicators, 2015, <http://data.worldbank.org/data-catalog/
world-development-indicators>, accessed June 12, 2015; China Daily, China Gini Coefcient at
0.474 2012, January 18, 2013, <http://www.chinadaily.com.cn/business/2013-01/18/content_
16140018.htm>, accessed June 12, 2015. The Gini coefcient is a measure of inequality that ranges
from 0, which represents total equality, to 1, which represents total inequality. Research conducted
Asian Survey, Vol. 56, Number 4, pp. 629650. ISSN 0004-4687, electronic ISSN 1533-838X. 2016 by
The Regents of the University of California. All rights reserved. Please direct all requests for permission
to photocopy or reproduce article content through the University of California Presss Reprints and
Permissions web page,http://www.ucpress.edu/journals.php?preprints. DOI: 10.1525/AS.2016.56.4.629.

629

630  ASIAN SURVEY 56:4

inequality during 2012 reached as high as 0.61, among the highest in the
world.2
This rate of inequality has been propelled by the growing accumulation
of wealth by high-net-worth individuals (HNWIs)those persons with
investable assets valued at US$ 1 million or moreand ultra-high-networth individualsthose with assets valued at $30 million and above. Such
individuals are growing in absolute numbers and command a growing share
of Chinas national GDP. Bain & Company analyses show that Chinas total
number of HNWIs (with over RMB 10 million [$1.5 million] in assets) grew
from 300,000 in 2008 to over one million in 2014.3 The value of investable
assets held by HNWIs increased from RMB 9 trillion ($1.37 trillion) in 2008
to an estimated RMB 27 trillion ($4.1 trillion) in 2013, when Chinas total
GDP was nearly RMB 57 trillion ($8.65 trillion).4 Of critical concern to
Chinas national leadership is the problem that a large proportion of HNWIs
have either left China through immigrant investor visa programs or indicated
a desire to do so.
The ight of its millionaires through emigration, as well as illegal transfers
of assets out of the country, has cost China trillions in US dollars over the last
decade, and represents a serious loss of human capital. This article investigates the recent phenomenon of wealth drain in China, which involves
both the emigration of HNWIs and the transfer of their assets abroad, or
capital ight. It applies Albert Hirschmans 1970 exit, voice, and loyalty
framework,5 considering why the winners of Chinas economic miracle are
increasingly opting to exit the country rather than expressing voice and seeking
-

by the United Nations has warned that high levels of inequality are linked to recent outbreaks of
social unrest; summarized in UN Department of Economic and Social Affairs, Inequality Matters:
Report of the World Social Situation 2013, United Nations Publication ST/ESA/345 (2013).
2. Survey and Research Center for China Household Finance, China Household Finance
Survey, 2013, <http://www.chfsdata.org/>, accessed June 12, 2015.
3. Bain & Company, China Private Wealth Report: 2013, <http://www.bain.com/Images/2013_
China_Wealth_Report.pdf>, accessed June 3, 2016; Bain & Company, Chinas Population of High
Net Worth Individuals Swelled to More Than One Million in 2014, May 26, 2016, <http://www.bain.
com/about/press/press-releases/2015-china-private-wealth-report-press-release.aspx>, accessed June 3,
2016.
4. Bain & Company (2013), p. 5; Xinhua, Chinas GDP Up 7.7 Percent in 2013, January 20,
2014, <http://news.xinhuanet.com/english/china/2014-01/20/c_133058484.htm>, accessed May 28,
2015.
5. Albert Hirschman, Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and
States (Harvard University Press, 1970).

HESS / THE FLIGHT OF THE AFFLUENT IN CHINA  631

to engage the political system to effect desired changes. Additionally, the

current study considers the impact of wealth drain on the short- and longterm resilience of the single-party authoritarian rule of the Chinese Communist
Party (CCP).

VOICE AND LOYALTY AMONG CHINAS HIGH-NET-WORTH

INDIVIDUALS

In Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and

States, Hirschman considers the problem of repairable lapses in organizations. These losses can also result from internal changes within the organization that negatively impact its performance.6 For Hirschman, addressing
repairable lapses requires that leaders learn about deciencies through two
kinds of political action. First, members or clients of the organization may
exit the situation, effectively voting with their feet. This results in material
losses such as lost sales, membership dues, or other revenues. These losses
may convince the leadership to examine and remediate the causes of these
exits. Second, members or clients can voice their concerns to management,
directly expressing their outrage and dissatisfaction with elements of the
status quo. This expression of voice can likewise compel leaders to attempt
to address the internal drivers of discontent.7
Aggrieved individuals thus have two primary alternative modes of action.
They have different costs and rewards, and actors can be expected to choose
the more benecial of the two. In general, when the costs of exit are low,
individuals choose this option instead of applying voice, a more confrontational
and often more costly endeavor. However, for political organizations such as
national states, the behavior of individuals can be modied by loyaltytheir
6. Ibid., pp. 12. More recent political science research that has revisited Hirschmans thesis
includes Colin M. Barry, K. Chad Clay, Michael E. Flynn, and Gregory Robinson, Freedom of
Foreign Movement, Economic Opportunities Abroad, and Protest in Non-Democratic Regimes,
Journal of Peace Research 51:5 (2014), pp. 574588; Michael K. Miller and Margaret E. Peters,
Migration Policy and Autocratic Power, paper presented at the APSA 2014 Annual Meeting,
November 15, 2014; Mark E. Warren, Voting with Your Feet: Exit-Based Empowerment in Democratic Theory, American Political Science Review 105:4 (2011), pp. 683701; Dina G. Okamoto and
Rima Wilkes, The Opportunities and Costs of Voice and Exit: Modelling Ethnic Group Rebellion
and Emigration, Journal of Ethnic and Migration Studies 34:3 (2008), pp. 347369; Albert O.
Hirschman, Exit, Voice, and the Fate of the German Democratic Republic: An Essay in Conceptual
History, World Politics 45:2 (1993), pp. 173202.
7. Hirschman, Exit, Voice, and Loyalty, p. 4.

632  ASIAN SURVEY 56:4

sense of patriotism and national attachment. This sense of loyalty can raise the
perceived cost of exit, thus increasing the relative appeal of voice.8 Such actors
are more likely to opt for voiceparticularly if the organization is open to
feedback and likely to reform in some desired way.
Many scholars have suggested that upwardly mobile capitalists have a natural inclination toward voice in modernizing societies. With the collapse of
the Soviet empire in late 1980s and early 1990s, neoliberal thinkers have
supported the notion of a unilinear, liberal convergence, in which all states
will ultimately open their economies to the global market, reduce state
involvement in the economy, allow free and unfettered markets to drive
growth, and ultimately see the appearance of an independent, assertive bourgeoisie that demands more political openness from the state. Francis Fukuyamas 1992 book The End of History and the Last Man suggested that the collapse
of communism had eliminated the only viable ideological alternative to liberal
democracy and free-market capitalism. History, he argued, had demonstrated
that these systems alone could satisfy the innate and relentless human desire for
recognition.9
In the case of China, supporters of the idea of a global neoliberal convergence have noted that market reforms have gradually pushed the national
economy in an observably neoliberal direction. As noted by Yao in 2011,
China has taken a unique step-by-step approach to economic reform adapted
to the countrys particular political and economic conditions. However, these
reforms have by and large conformed to the goals of the Washington Consensus. China has maintained a balanced budget, worked to rein in ination,
avoided redistributive social programs, focused its government spending on
infrastructure development, privatized or publicly listed 80% of its stateowned enterprises, and opened the country up widely to inward foreign
investment.10 Scott Kennedy in 2010 noted that despite suggestions that
China has developed an alternative mode of economic development to the
Washington Consensus, Beijing had in fact embraced 8 of the 10 policy instruments recommended in John Williamsons 1990 formulation.11 In a similar
8. Ibid., pp. 7981.
9. Francis Fukuyama, The End of History and the Last Man (New York: Avon Books, 1992), p. xx.
10. Yang Yao, Beijing Consensus or Washington Consensus: What Explains Chinas Economic
Success? World Bank, April 2011, <http://hdl.handle.net/10986/6098>, accessed September 19, 2014.
11. Scott Kennedy, The Myth of the Beijing Consensus, Journal of Contemporary China 19:65
(2010), p. 470; John Williamson, What Washington Means by Policy Reform, in Latin American

HESS / THE FLIGHT OF THE AFFLUENT IN CHINA  633

vein, neoclassical economists have argued that Chinas economic success is

a testament to the benets reaped from market-friendly policies such as trade
liberalization, privatization, and deregulation. They suggest that Beijing will
likely need to privatize enterprises and sectors of the economy that currently
remain under state control and cease its mercantilist manipulation of the
renminbi in order to sustain Chinas growth.12
While many theorists have identied the upwardly mobile bourgeoisie as
the historical agent of liberalization,13 a signicant body of research has found
that business entrepreneurs in China are, if anything, the social groups most
loyal and intimately connected to the CCP party-state apparatus. In step with
Hirschmans 1970 conceptual framework,14 the loyalty of Chinas HNWIs
has modied their political behavior. Because they have disproportionately
beneted materially from Chinas development and see the CCP acting as
a protector of their domestic business operations (against popular unrest and
redistributive demands from Chinas working class), HNWIs are inclined to
support the regime, rather than confronting it or demanding radical political
reform. In fact, a political opening-up in China might well run counter to
their material interests, as the state would be under greater pressure to
respond to the redistributive demands of Chinas working-class majority.
Additionally, the CCP has created institutional openings that allow
HNWIs to inuence the policymaking process, thus channeling voice into
rather than against the political system. Despite some examples of whitecollar protests centered on cadre corruption, land seizures, and environmental
pollution, Jonathan Unger has argued, the Chinese educated middle class has
[instead] become a bulwark of the current regime, conservative in its outlook,
concerned with material gains, and supportive of the political status quo.15 This
follows patterns observed elsewhere in the developing world, where commercial
-

Adjustment: How Much Has Happened? ed. John Williamson (Peterson Institute for International
Economics, 1990), <https://piie.com/commentary/speeches-papers/what-washington-means-policyreform>, accessed June 3, 2016.
12. Jarrod Gibbons and Kishore G. Kulkarni, An Analysis of Chinas Economic Reform Using
the Neo-Classical Model of International Trade, Journal of Emerging Knowledge on Emerging Markets 3 (November 2011), pp. 2223.
13. Alexis de Tocqueville, Democracy in America, trans. Gerald Bevan (New York: Penguin Books,
[1835] 2003), pp. 617629; Joseph Schumpeter, Capitalism, Socialism, and Democracy (New York:
Harper, [1942] 1950), p. 297.
14. Hirschman, Exit, Voice, and Loyalty, pp. 7981.
15. Jonathan Unger, Chinas Conservative Middle Class, Far Eastern Economic Review, April
2006, pp. 2731.

634  ASIAN SURVEY 56:4

interests have found repression to be necessary for generating sustained growth.

In late-developing societies, Samuel Huntington and Joan Nelson observed,
political participation must be held down, at least temporarily, in order to
promote economic development.16 Guillermo ODonnell noted in 1973 that
many Latin American states were developing a novel form of governance that
effectively coupled capitalist development with an autocratic state. In this form
of autocracy, called bureaucratic authoritarianism, the state, instead of acting
as a simple instrument of dominant social classes, namely the bourgeoisie, and
exploiting the working class to the point of exhaustion, sought to organize the
entirety of social relations.17
In her 2007 study of Chinas emerging class of business entrepreneurs,
Kellee S. Tsai contests the assumption that Chinas capitalists are an assertive
social force independent of the political status quo.18 Tsai instead suggests that
Chinas business entrepreneurs are assuredly not agitating for liberal democratic
change. Rather, entrepreneurs, through their day-to-day interactionswith
one another and with local ofcialswere changing the countrys formal
political institutions in ways that reected their needs and interests.19 The
state as whole, in other words, treats business elites as a favored group, tending
to accommodate and support rather than restrict their prot-seeking ventures.
Eileen Yuk-Ha Tsang in 2014 noted that a variety of state policies in the
Reform era have specially beneted well-placed and politically connected
individuals. For example, during the dual-pricing scheme of the 1980s, cadres
could purchase large quantities of goods at lower, xed state prices, sell them
off for higher market-determined prices, and pocket . . . the spread.20 Additionally, because of Chinas system for property transactions, in which the state
owns all urban land but sells land-use rights to commercial developers, many
well-placed cadres and citizens connected to urban work units have been able
to rapidly accumulate wealth through land transactions. The maintenance of
the danwei (work unit) and hukou (household registration) systems has meant
16. Samuel Huntington and Joan Nelson, No Easy Choice: Political Participation in Developing
Countries (Harvard University Press, 1976), p. 23.
17. Guillermo ODonnell, Modernization and Bureaucratic-Authoritarianism (Berkeley: University of California Press, [1973] 1988), pp. 24.
18. Kellee S. Tsai, Capitalism without Democracy: The Private Sector in Contemporary China
(Ithaca, NY: Cornell University Press, 2007).
19. Ibid., p. 5.
20. Eileen Yuk-Ha Tsang, The New Middle Class in China (London: Palgrave McMillan, 2014),
p. 5.

HESS / THE FLIGHT OF THE AFFLUENT IN CHINA  635

that individuals who possess an urban hukou from birth or purchase one
through an illegal transaction are entitled to public servicesbetter schooling
and social benets, as well as legal employment statusinaccessible to those
with rural hukou.21
Closely linked to these institutional benets, guanxi, or connections to the
political state, are critical to commercial success in the Chinese market, which
lacks the effective rule of law. Consequently, successful entrepreneurs develop
dense personal connections to ofcialdom, which provide them with privileged access to public resources and protection from ofcial scrutiny. Moreover, individuals in the state apparatus partner with well-connected
individuals in suppressing marginal sectors of society, such as rural migrant
workers employed in urban areas, who lack legal status and provide a readily
exploitable labor pool. These ndings imply a general harmony of interests
between Chinese entrepreneurs and the CCP and a general pattern of highlevel coordination and collusion between ofcials and private business elites.
After several decades of economic growth and expansion, many scholars have
begun to suggest that China is not undergoing an imperfect transition toward
neoliberalism but instead represents a viable alternative to it.22
THE EXIT OF THE AFFLUENT: CHINAS WEALTH DRAIN

An emerging alternative to loyalty is exit, manifested in the phenomenon of

wealth drain. Over the past two decades, this pattern has complicated the
belief that the CCPs efforts to provide favorable policies to HNWIs and
facilitate their input into policymaking have secured HNWIs enduring loyalty to the regime. Instead, a growing number of Chinas wealthiest citizens
have voted with their feet, exiting China to seek citizenship elsewhere and
increasingly shifting their assets to overseas locations. Emigration from China
has been accelerating over the past decade. From 1990 to 2000, Chinas net
emigration averaged 143,000 citizens per year. Between 2000 and 2010, this
increased to 418,000 citizens each year.23 Over the last two decades, notably
21. Ibid., pp. 58.
22. Joshua Cooper Ramo, The Beijing Consensus (London: Foreign Policy Centre, 2004), pp. 113;
Stefan Halper, The Beijing Consensus: Legitimizing Authoritarianism in Our Time, paperback ed. (New
York: Basic Books, 2012), p. xix; Dani Rodrik, The New Mercantilist Challenge, Project Syndicate,
January 9, 2013, <http://www.project-syndicate.org/commentary/the-return-of-mercantilism-by-danirodrik>, accessed September 23, 2014.
23. United Nations, International Migration Report, 2015.

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19932015, the total worldwide number of emigrants originating from China

grew from 4.1 million to 10 million.24 Of these, 2.02 million settled in the US,
along with Canada (896,000), South Korea (657,000), Japan (655,000), Australia (547,000), and Singapore (457,000).25 This spike in emigration has
come in spite of Chinas robust economic growth over the last two decades.
The departed Chinese nationals can largely be considered brain drain:
the Chinese immigrant community has a high average income and educational
attainment. For example, for the Chinese immigrant community in the US,
47% have education equivalent to a bachelors degree or higher, compared to
32% in the general population and 28% among the remaining immigrant
population. Chinese immigrants also have relatively high incomes, with
a median annual income of $57,000, compared to medians of $48,000 in the
immigrant population and $53,000 for the native-born population.26
Notably, China also has a large and growing population of students studying abroad459,800 as of 2014with 274,000 enrolled in higher education
institutions in the US alone.27 Of concern to Beijing, these students have had
an exceptionally high stay rate, particularly at the doctoral level, and most
often do not return to China after acquiring the technical skills and education demanded by the national economy. According to the China Ministry of Education (2009), 700,200 students had studied overseas from 1978
to 2003. As of 2009, only 172,800 (25%) had returned.28 A study of
Chinese doctorate recipients in the US found that among students who
received doctorates in 2006, 85% remained in the US ve years later in
2011. Since 2001, an average of 92.3% of Chinese students had remained in

24. Ibid.
25. Hurun Report and Visas Consulting Group, Immigration and the Chinese HNWI, 2014,
<http://up.hurun.net/Humaz/201406/20140606132402353.pdf>, accessed September 27, 2014, p. 7.
26. Kate Hooper and Jeanne Batalova, Chinese Immigrants in the United States, Migration
Policy Institute, January 28, 2015, <http://www.migrationpolicy.org/article/chinese-immigrantsunited-states>, accessed May 27, 2015.
27. Institute of International Education, Open Doors 2014: International Students in the
United States and Study Abroad by American Students Are at All-Time High, November 17, 2014,
Washington, DC.
28. Of the 527,400 who had not returned, the Ministry indicated that 356,600 were still continuing
their education or working as visiting scholars in foreign countries. Ministry of Education of the
Peoples Republic of China, The Overall Situation of Studying Abroad, September 17, 2009, <http://
www.moe.edu.cn/publicles/business/htmlles/moe/s3917/201007/91574.html>, accessed May 27,
2015.

HESS / THE FLIGHT OF THE AFFLUENT IN CHINA  637

the US, outpacing the average of 63.3% for all foreign doctoral students
studying there from 2001 to 2011.29
The high loss rate of many of Chinas most educated citizens has long been
an issue of concern within the national leadership. Since the mid-1990s,
Beijing has used various incentive programswith mixed effectto attract
Chinese graduates and academics back from overseas, including large bonuses
(up to $150,000), large and guaranteed salaries, free housing, and subsidized
equipment and ofce space.30 Nevertheless, the pattern of brain drain persists, and China continues to lose a large proportion of those students who go
abroad, much higher than most other sending countries.
More recently, China has seen wealth drain as a growing number of its
most afuent citizens exit the country, transferring their capital overseas and
seeking permanent residency and citizenship abroad. A 2014 survey by Barclays of 2,000 Chinese nationals, each worth over $1.5 million, found that
47% of respondents planned to emigrate within the next ve years.31 This
proportion of Chinese HNWIs seeking to relocate is remarkably high compared to the global average of 29%. Among the reported destinations for
potential Chinese HNWI emigration are Singapore (23%), Britain (20%),
Hong Kong (16%), the US (6%), and even India (5%), which has a lower level
of development than China (as measured by GDP per capita).32 A survey of
980 HNWIs conducted by the Hurun Report and Visas Consulting Group
found that an even higher numberover 60%intended to leave China.
The primary reasons included the desire to secure better educational opportunities (21%), followed by persistent quality-of-life problems in China: environmental pollution (20%), food safety (19%), social welfare (15%), and poor

29. Michael G. Finn, Stay Rates of Foreign Doctorate Recipients from U.S. Universities, 2011,
Oak Ridge Institute for Science and Education, January 2014, <http://orise.orau.gov/les/sep/stayrates-foreign-doctorate-recipients-2011.pdf>, accessed May 27, 2015.
30. The Economist, A Matter of Honors: China is Trying to Reverse its Brain Drain, November
22, 2014, <http://www.economist.com/news/china/21633865-china-trying-reverse-its-brain-drainmatter-honours>, accessed May 27, 2015; David Zweig and Huiyao Wang, Can China Bring
Back the Best? The Communist Party Organizes Chinas Search for Talent, China Quarterly 215
(September 2013), pp. 590615.
31. Dexter Roberts, Almost Half of Chinas Rich Want to Emigrate, Bloomberg Business Week,
September 15, 2014, <http://www.businessweek.com/articles/2014-09-15/almost-half-of-chinas-richwant-to-emigrate>, accessed September 24, 2014.
32. Barclays, Wealth Insights: The Rise of the Global Citizen? September 15, 2014, <https://wealth.
barclays.com/content/dam/bwpublic/global/documents/shared/wealth-inisghts-volume-18.pdf>.

638  ASIAN SURVEY 56:4

health care (11%). These factors were trailed by economic issues such as asset
security (8%) and tax concerns (1%).33 In addition to concerns that their
assets might be vulnerable to expropriation, Chinese also emigrate to escape
restrictions on their political and spiritual beliefs.34
Aside from such surveys, the extent of emigration of Chinese HNWIs can
be observed in the groups growing participation in immigrant investor programs offered by a number of countries. These offer permanent residence to
foreign nationals who demonstrate high personal wealth, locally invest a set
amount of capital (usually $500,000 to $1.5 million), and/or create a minimum number of local jobs. Chinese nationals constituted over 85% of such
applications to the US EB-5 program in 2014,35 76% of the 59,000 applications received for the Canadian Immigrant Investor program,36 and 91% of
the 1,679 applications submitted for the Australian Signicant Investor Visa
program between 2012 and 2015.37 Chinas growing rate of net emigration, the
low return rate of its students studying abroad, and the growing number of
Chinese HNWIs applying for immigrant investor programs in foreign countries together suggest that despite the great attention given to haiguiethnic
Chinese returnees seeking to participate in Chinas growing economy
China has on balance continued to be a leading sender of international
migrants. This also complicates the perception of Chinas rise in the face
of Western economic decline during the 20072008 nancial crisis. While
the West struggled under particularly difcult economic times, Chinas citizens, particularly its most educated and afuent, continued to exit the country in growing numbers. These trends have created serious losses in terms of
both material and human capital.

33. Hurun Report and Visas Consulting Group, Immigration and the Chinese HNWI, p. 9.
34. Interview with scholar, Taipei, Taiwan, May 28, 2015.
35. US Department of State, Report of the Visa Ofce 2014, <http://travel.state.gov/content/visas/
english/law-and-policy/statistics/annual-reports/report-of-the-visa-ofce-2014.html>, accessed May
27, 2015.
36. These are the gures at the time of the programs freezing under public pressure in 2012.
Michael Cole, Canada Slams Door on 45K Chinese Millionaires with End of Visa Program, Forbes,
February 14, 2014, <http://www.forbes.com/sites/michaelcole/2014/02/13/canada-slams-door-on-45kchinese-millionaires-with-end-of-visa-program/>, accessed May 28, 2015.
37. Australian Government Department of Immigration and Border Protection, Signicant
Investor Visa Statistics, April 15, 2015, <http://www.immi.gov.au/pub-res/Pages/statistics/signicantinvestor-visa-statistics.aspx>, accessed May 28, 2015.

HESS / THE FLIGHT OF THE AFFLUENT IN CHINA  639

EXIT VERSUS VOICE

The barriers to exit in the sending country and the mobility of an individuals
wealth can impact the cost of exit. Exit is more appealing for actors who have
movable wealthliquid assets, that is, stocks, bonds, and short-term investmentsthat can readily be transferred out of country.38 Actors with xed
assetsproperty, plant, and equipmentmay nd it harder to convert them
into cash. In the 2014 Hurun survey of Chinese HNWIs, respondents identied the source of their assets as salary and income (31%), returns on investment (27%), operating a business (23%), family gifts or inheritance (13%),
and sale of a company (6%).39 While roughly half of Chinese HNWIs
indicated an intention to emigrate and/or to invest overseas, most maintained
a large stock of income-generating assets within China. Among Chinese
HNWIs, 52% reported that less than 5% of their assets were located overseas.
A sizable minority (25% of respondents) indicated that over 50% of their assets
were already overseas.40 As discussed in the following paragraphs, HNWIs have
proven adept at transferring funds outside Chinas borders. It is likely, therefore, that many high-net-worth emigres will maintain their most lucrative
operations within China and act as foreign investors, continuing to generate
wealth within the country but transferring these prots overseas.
Over the last 30 years, Beijing has been concerned about the prospect of
capital ight and attempted to maintain effective control over currency outows. However, wealthy citizens have grown increasingly skilled at circumventing these obstacles. As noted by Harvey, a central element of the Chinese
approach to economic development has been maintaining effective control
over capital ows and exchange rates. The country struggles with a massive
labor surplus, making Chinas leadership extremely concerned that slowing
growth might yield destabilizing social unrest. As a consequence, the problem
of labor surplus has been addressed by heavy state-led investment in infrastructure and xed capital formation projects, a situation that can only be
maintained via strict state controls over capital ows.41 As a consequence,
Chinas banking system has remained under effective state control, and individuals are not legally permitted to transfer more than $50,000 out of the
38. Albert Hirschman, Exit, Voice and the State, World Politics 31:1 (October 1978), p. 96.
39. Hurun Report and Visas Consulting Group, Immigration and the Chinese HNWI, p. 8.
40. Ibid., p. 13.
41. David Harvey, A Brief History of Neoliberalism (Oxford, UK: Oxford University Press, 2005),
pp. 120141.

640  ASIAN SURVEY 56:4

country in any given year without ofcial permission. Beijing has thus developed a regime for controlling capital ows, restricting the movement of capital
into and out of the country, and limiting foreign investment in particular
core industries: nance, transportation, energy, and telecommunications.
But Chinese HNWIs have become increasingly effective at eluding efforts
by the Chinese state to control and limit capital ows. A 2012 report by
Global Financial Integrity, a Washington-based think tank, found that the
Chinese economy had lost $3.79 trillion from illicit nancial outows during
2000 to 2011.42 Chinas HNWIs have developed an array of methods. According to Global Financial Integrity, trade mispricing (or trade misinvoicing) is the
single largest component of recorded illicit nancial outows, making up 54%
of all illicit ows in the developing world from 2000 to 2009.43 The practice
involves individuals or rms understating their exports and over-reporting
their imports. They may, for example, sell $1,000-worth of goods abroad,
show an invoice for $800, and keep the remainder overseas.44 This mechanism
alone accounted for $3.2 trillion (86.2%) of the $3.79 trillion total.45 Misinvoicing is only one of many techniques that wealthy Chinese have developed for
getting around Beijings capital controls. As noted by Frango, Orlik, and Wei,
writing in the Wall Street Journal:
A sprawling industry has developed to help Chinese get money out. Services range
from the money-transfer agents to private jets that ferry money by customs
ofcials unmolested, according to lawyers and brokers who help Chinese investors
nd investments abroad. Sometimes bank transfers by companies hide personal
money being moved out, these people say. Another method is to piggyback
personal cash atop legitimate export and import transactions, at times by using
fake invoices, they say. People even carry bags of cash across the border.46
42. Dev Kar and Sarah Freitas, Illicit Financial Flows from China and the Role of Trade
Misinvoicing, Global Financial Integrity, October 2012, p. iv.
43. Ibid., p. 4.
44. The Economist, The Flight of the Renminbi, October 27, 2012, <http://www.economist.
com/news/china/21565277-economic-repression-home-causing-more-chinese-money-vote-its-feetight>, accessed September 13, 2014.
45. Clark Gascoigne, Chinese Economy Lost $3.79 Trillion in Illicit Financial Outows since
2000, Reveals New GFI Report, Global Financial Integrity, October 25, 2012, <http://www.
gntegrity.org/press-release/chinese-economy-lost-3-79-trillion-illicit-nancial-outows-since-2000reveals-new-g-report/>, accessed September 13, 2014.
46. Alex Frango, Tom Orlik and Lingling Wei, In Reversal, Cash Leaks Out of China, Wall
Street Journal, October 15, 2012, <http://www.wsj.com/articles/SB100008723963904435072045780
20272862374326>, accessed June 3, 2016.

HESS / THE FLIGHT OF THE AFFLUENT IN CHINA  641

Such mechanisms have helped reduce the cost of exit. Barriers to entry into
desirable receiving countries can also impact the cost of exit. For Chinese
seeking to emigrate, the main barrier is nancial cost, meaning that exit is
readily available to Chinas most afuent citizens but extremely challenging
for average citizens. Wealthy Chinese seeking to immigrate to foreign countries have identied long waiting times (28%), application problems (13%),
and high costs (10%) as institutional barriers but have nevertheless continued
to apply for and receive foreign residence visas in large numbers.47 First-world
countries seeking to attract wealthy individuals who might invest, create
employment opportunities, and contribute tax revenues have created visa
categories designed to encourage the immigration of HNWIs. A growing
number of Chinese HNWIs have participated in the United States EB-5
visa program, which allows individuals who invest at least $500,000 in an
American business and create no fewer than 10 jobs to attain permanent
residency for themselves and their immediate family members.48 In 2004,
only 16 EB-5 visas (13% of the total) were issued to mainland-born Chinese;
by 2008, this gure reached 360. In 2013, that exploded to 6,895 visas, and
Chinese investor immigrants received 80% of the total number of EB-5 visas
issued.49 In 2014, 9,128 mainland-born Chinese received EB-5s, 85.4% of the
10,692 total issued.50
Similar visas have been issued to wealthy Chinese seeking to invest and live
elsewhere abroad, netting large numbers of HNWIs. The Canadian Federal
Immigrant Investor Program has been particularly popular for Chinese
HNWIs. Countries such as South Korea, Australia, New Zealand, the Caribbean island-nations of Antigua and Barbuda, Dominica, Grenada, St. Kitts
and Nevis, and many European countries, such as Britain, Portugal, and Bulgaria, have similar programs.51 In an effort to attract wealthy investors, national
47. Hurun Report and Visas Consulting Group, Immigration and the Chinese HNWI, p. 10.
48. Audrey Singer and Camille Galdes, Improving the EB-5 Investor Visa Program: International
Financing for U.S. Regional Economic Development, Brookings-Rockefeller Project on State and
Metropolitan Innovation, Washington, DC (February 2014), p. 1.
49. Sophia Yan, Rich Chinese Overwhelm U.S. Visa Program, March 25, 2014, <http://money.
cnn.com/2014/03/25/news/economy/china-us-immigrant-visa/>, accessed September 27, 2014.
50. US Department of State, Report of the Visa Ofce 2014.
51. Hurun Report and Visas Consulting Group, Immigration and the Chinese HNWI, p. 7;
Arton Capital, Global Citizen Programs, 2015, <http://www.artoncapital.com/global-citizen-programs/
program-overview/>, accessed May 28, 2015; David Barreda, Wealthy Chinese Are Fleeing the Country
Like Mad, China File, February 3, 2015, <http://www.chinale.com/multimedia/infographics/wealthychinese-are-eeing-country-mad>, accessed May 28, 2015.

642  ASIAN SURVEY 56:4

governments have created various immigrant investor programs, substantially

lowering the costs of entry for Chinese HNWIs. Since the average Chinese
HNWI has assets valued at RMB 31 million ($5 million), meeting the minimum investment thresholds for most immigrant investor visas ($500,000
$1.5 million) is quite attainable.52 According to survey data, on average Chinese HNWIs consider RMB 5 million ($806,568) the appropriate amount to
spend on immigration.53 Clearly, in a country with a GDP per capita of
$6,807 in 2014,54 this avenue for immigration is only accessible to the wealthiest echelons of Chinese society. For those with sufcient capital to invest
overseas, immigrant investor programs have helped streamline emigration
efforts, lowering the costs of exit for the afuent.
Another factor in choosing between exit and voice is the relative safety of
ones assets in the home country. When wealthy individuals perceive that
their assets are under increasing threat at home, they are likely to seek safer
venues to store their wealth overseas. Hirschman notes that the wealthy have
a strong motivation to transfer their assets from less secure locations to countries with lower tax burdens, stronger property rights, and an overall better
business climate.55 For afuent Chinese, this could certainly be the case. The
Heritage Foundation Index of Economic Freedom includes a measure for
property rights with 100 representing a country with robust and wellenforced legal protections for property, and 0 representing a country with
no effective legal protections. China scored a 20 out of 100 (138th of 178
countries). This score is based on the assessment, Private property is weakly
protected. The court system is so inefcient and corrupt that outside settlement and arbitration [are] the norm. Property rights are difcult to enforce.
Judicial corruption is extensive. Expropriation is common.56 The World Bank
Ease of Doing Business rankings similarly nd that the business climate in
China is challenging for starting a business, operating a business, and avoiding
expropriation.57 Some wealthy individuals running private companies have also
faced competition and pressure from well-connected state-owned enterprises,
52. Bain & Company (2013), p. 3; Barreda, Wealthy Chinese.
53. Hurun Report and Visas Consulting Group, Immigration and the Chinese HNWI, p. 14.
54. World Bank, World Development Indicators (2015).
55. Albert Hirschman, Exit, Voice and the State, p. 100.
56. Heritage Institute, Index of Economic Freedom: 2015, <http://www.heritage.org/index/>, accessed
May 26, 2015.
57. World Bank, Ease of Doing Business Rankings, 2015, <http://www.doingbusiness.org/
rankings>, accessed June 9, 2015.

HESS / THE FLIGHT OF THE AFFLUENT IN CHINA  643

motivating them to liquidate assets and relocate them to safer destinations

overseas.58 These ratings suggest that China, relative to many offshore destinations, presents a great deal of risk to wealthy individuals, creating a clear
incentive to transfer assets overseas.
It is worth noting that Chinese HNWIs are often the beneciaries of
Chinas challenging and often opaque business climate. As individuals who
have cultivated effective personal relations (guanxi) within the Chinese political
economy, they have often gained economic access and found opportunity
where foreign rivals might not. Additionally, many have participated in corrupt
dealings in the accumulation of their wealth, meaning it might be under threat
should the political winds within the CCP leadership shift. While their fortunes were and are generated in China, these assets may nevertheless not be safe
remaining there.
In 2013, Wang Xiaolu, an ofcial at Chinas National Economic Research
Institute, estimated that the countrys citizens hide as much as $2.34 trillion in
gray income each year, which amounts to roughly 20% of Chinas entire
GDP.59 According to the Hurun Report, there are known to be 149 super-rich
individuals in China each with assets over $1.6 billion; however, there are
estimated to be an additional 150 individuals at this level if we factor in hidden
wealth.60 These additional revenues are often derived from dubious, off-thebooks incomes that pervade Chinese society, including kickbacks for contracts;
perks provided to high-level employees, such as private cars and drivers; and
additional fees that are added on to basic services.61 Despite efforts by the
central government to crack down on gray income and illegal transnational
nancial transactions,62 these incomes are readily hidden. They can then be
transferred to safer destinations with offshore tax havens, such as the British
Virgin Islands and Samoa, both emerging as preferred destinations.63
58. Interview with scholar, Taipei, Taiwan, June 8, 2015.
59. Abby Liu, Hiding $2.34 Trillion in China, Global Voices, March 7, 2013, <http://global
voicesonline.org/2013/03/07/chinese-households-have-2-34-trillion-in-hidden-income/>, accessed September 27, 2014.
60. Hurun Report and Visas Consulting Group, Immigration and the Chinese HNWI, p. 20.
61. Liu, Hiding $2.34 Trillion.
62. Jane Cai, Gray Income Too Difcult to Dene in Report, South China Morning Post,
March 15, 2010, <http://www.scmp.com/article/708626/grey-income-too-difcult-dene-report>,
accessed September 27, 2014.
63. Dexter Roberts, Chinas Elite Wealth in Offshore Tax Havens, Leaked Files Show, Bloomberg
Businessweek, January 22, 2014, <http://www.businessweek.com/articles/2014-01-22/chinas-elitewealth-in-offshore-tax-havens-show-leaked-les>, accessed September 27, 2014.

644  ASIAN SURVEY 56:4

In addition to hiding wealth offshore, many HNWIs have either emigrated

from China or have made preparations to do so. Many of these include naked
ofcials (luoti zuoguan) and economic fugitives, The former are cadres with
low ofcial salaries who abuse their ofces to accumulate massive levels of wealth,
which they in turn transfer to spouses and children who have already migrated
abroad. According to Chinas Ministry of Commerce, the problem is extensive.
Between 1978 and 2003, as many as 4,000 naked ofcials ed the country, taking
at least $50 billion with them.64 A condential 2008 report by the Peoples Bank
of China, Chinas central bank, suggested the gures might be even higher.
According to the study, since the mid-1990s, as many as 18,000 corrupt government ofcials have ed abroad, taking up to $123 billion with them. Most of
these ofcials went directly to Western countriesthe US, Canada, Australia,
and the Netherlands being the most popular destinations.65 At present, there are
an estimated 1.2 million ready-to-ee naked ofcials with nancial assets and
families outside China, based on gures released by the Xinhua News Agency
and Chinese Academy of Governance Professor Zhu Lijia.66 In July 2014, the
Guangdong provincial government announced that it had identied 2,190
naked ofcials within its ranks and had removed 866 from ofce.67 Shortly after
the Guangdong crackdown, the Central Commission for Discipline Inspection,
Chinas leading anticorruption agency, launched an investigation of naked ofcials in 10 provinces. In instructions issued to subnational governments, the
agency ordered the collection of information on the family members of government workers from all departments, especially family members of ofcials
who had obtained foreign citizenship or foreign residence permits.68
64. Xie Yu, Government Wants a Better View of Naked Ofcials, China Daily, February 24,
2010, <http://www.chinadaily.com.cn/china/2010-02/24/content_9492278.htm>, accessed September 13, 2014.
65. James Areddy, Report: Corrupt Chinese Ofcials Take $123 Billion Overseas, Wall Street
Journal blogs, June 16, 2011, <http://blogs.wsj.com/corruption-currents/2011/06/16/report-corruptchinese-ofcials-take-123-billion-overseas/>, accessed September 13, 2014.
66. John Kennedy, China Has At Least 1.8 Million Ready-to-Flee Naked Ofcials, AntiCorruption Rant Reveals, South China Morning Post, February 27, 2013, <http://www.scmp.com/
comment/blogs/article/1159628/china-has-least-118-million-ready-ee-naked-ofcials-anti-corruption>,
accessed September 13, 2014.
67. Kazunori Takada, Chinas Guangdong Province Removes Over 850 Ofcials from Their
Posts, Reuters, July 26, 2014, <http://uk.reuters.com/article/2014/07/26/uk-china-corruptionidUKKBN0FV04I20140726>, accessed September 13, 2014.
68. Laura Zhou, China Searches Entire Bureaucracy in Ten Provinces to Pinpoint Naked
Ofcials, South China Morning Post, July 15, 2014, <http://www.scmp.com/news/china/article/

HESS / THE FLIGHT OF THE AFFLUENT IN CHINA  645

Chinas leaders have also attempted to capture economic fugitives who

have immigrated to foreign countries. In 2014, Chinas Ministry of Public
Security identied 150 economic fugitives who were eluding corruption charges
by residing in the US. One ofcial in the ministry, Liao Jinrong, described the
US as the top destination for Chinese fugitives eeing the law and indicated
that repatriating economic fugitives from there was difcult, due to the lack of
an extradition treaty and the complex and lengthy legal procedures.69 Other
leading destinations, Canada, Australia, and the Netherlands, also lack extradition treaties with China.70
Adding a legal barrier to extradition, once in the US and other Western
countries, escaped Chinese ofcials often claim political asylum, arguing that
the charges against them are politically motivated and asserting that they
would be denied a fair trial and face torture and/or the death penalty should
they be repatriated.71 According to Chinas Ministry of Public Security, of 150
economic fugitives abroad, primarily in the US, only two have ever been
successfully repatriated from the US to China.72
This trend of eeing ofcials is likely to continue and accelerate in the
midst of President Xi Jinpings anticorruption campaign.73 Thus, wealthy
individuals in China operate under conditions of economic uncertainty.
They face competition from other well-connected rms and individuals, and
the necessity of establishing informal, quasi-legal connections to ofcialdom
-

1554704/china-searches-entire-bureaucracy-10-provinces-pinpoint-naked-ofcials>, accessed September

13, 2014.
69. Zhang Yan, Many Chinese Economic Fugitives Still at Large in US, China Daily, August
11, 2014, <http://usa.chinadaily.com.cn/us/2014-08/11/content_18282253.htm>, accessed September
13, 2014.
70. Sui-Lee Wee, Corrupt Chinese Hiding in Western Nations Elude Beijings Fox Hunt,
Reuters, August 27, 2014, <http://www.reuters.com/article/2014/08/28/us-china-corruptionidUSKBN0GS01S20140828>, accessed September 13, 2014.
71. Sui-Lee Wee, China Says over 150 Economic Fugitives at Large in the U.S., Reuters,
August 11, 2014, <http://www.reuters.com/article/2014/08/11/us-china-corruption-idUSKBN0GB0
CS20140811>, accessed September 13, 2014.
72. Ibid.
73. In 2014 alone the Central Commission for Discipline Inspection investigated over 53,000
ofcials, disciplined over 71,000, and severely disciplined over 23,000 others. Demonstrating the
intensication of anticorruption activities, the numbers reported by the commission in 2014 dwarfed
the over 24,000 investigations, 30,000 disciplined ofcials, and 7,600 severely disciplined ofcials
reported by the commission from December 2012 to the end of 2013. Shujie Leng and David
Wertime, Chinas Anti-Corruption Campaign Ensnares Tens of Thousands More, Foreign Policy,
January 9, 2015, <http://foreignpolicy.com/2015/01/09/chinas-anti-corruption-campaign-ensnarestens-of-thousands-more/>, accessed May 27, 2015.

646  ASIAN SURVEY 56:4

to protect ones business interests makes many individuals fearful that as the
political winds change, they may face the loss of assets or even prosecution.
This has motivated many individuals to hedge their bets by either exiting the
country or making preparations to do so.

IMPLICATIONS

The exit of citizens can have a number of impacts on the stability of a regime.
The loss of potential regime opponents can strengthen the regime and mitigate public demands for change; it can also weaken the regime through the
loss of economic resources and human capital. In the latter scenario, damaging exits, as Hirschman suggests, can serve as a feedback mechanism,
motivating a regime either to coercively attempt to stem the losses and/or
to improve society by addressing emigre grievances to prevent such losses.74
In one scenario, regimes may be strengthened by the emigration of dissidents
and potential opponents. Instead of mobilizing popular or internal challenges
to the leadership, aggrieved groups and individuals elect to leave the polity
altogether. In some societies, such a loss could be seen in a mostly positive light.
Hirschman references Europe in the nineteenth and early twentieth centuries,
where the outow of citizens alleviated problems such as urban overcrowding
and had little negative impact on the economies of labor-rich societies. Moreover, the boats of emigres leaving Europe were full of potential anarchists and
socialists, reformers and revolutionaries.75 In many respects, their exit was
welcomed, as it removed social pressures and weakened anti-regime forces.
Steven Pfaff found that denying exit could in fact encourage popular dissent,
as groups and individuals who otherwise would have exited would voice their
demands and confront the regime. Often such citizens would be expelled from
the countrya pattern Pfaff describes as noisy exit.76 Barry et al. have found
that in non-democracies from 1981 to 2007, regimes that permitted freedom of
movement (i.e., exit) signicantly reduced civil unrest.77 For China, such
a dynamic was most visible in the wake of the 1989 Tiananmen protests, when
Washington, fearing that students and scholars who participated in
74. Hirschman, Exit, Voice, and Loyalty, pp. 12.
75. Hirschman, Exit, Voice and the State, p. 102.
76. Steven Pfaff, Exit-Voice Dynamics and the Collapse of East Germany (Durham, NC: Duke
University Press, 2006), p. 80.
77. Barry et al., Freedom of Foreign Movement.

HESS / THE FLIGHT OF THE AFFLUENT IN CHINA  647

demonstrations while overseas would suffer punishment upon their return

home, granted employment authorization and eventually permanent residency
status to Chinese citizens within the US. Over 80,000 Chinese nationals
participated in the program, with 53,000 eventually receiving green cards.78
From the late 1980s to the mid-1990s, a wave of students, intellectuals, and
other citizens concerned with state repression ed to both Canada and the
US.79 While it lost a well-educated cohort of students and academics, the CCP
also saw thousands of potential dissidents exit society.
Of serious concern to the architects of Chinas long-term development,
since the mid-1990s the emigre population has shifted from political asylum
seekers to individuals whose entry into receiving countries was based on
human capital and investment.80 Researchers such as Chen and Dickson,
and Tsai, have found that the more afuent Chinese have reported aboveaverage loyalty for the regime: they are the leading beneciaries of economic
growth in Chinas increasingly unequal society. Moreover, they have utilized
day-to-day interactions with ofcialdom, ties to consultative bodies, and even
party membership to inuence policies within the country.81 Also, the departing population of wealthy emigres appears to combine individuals concerned
with quality-of-life issues in China82 with individuals who fear that they and
their fortunes may be targeted amid growing anticorruption measures.
This suggests that those HNWIs eeing China do not resemble traditional
political dissidents or asylum seekers concerned with Chinas human rights
conditions or its restrictions on civil liberties. Consequently, the ight of these
wealthy emigres may not represent a regime-enhancing alleviation of dissent
and discontent. Perhaps most importantly, their exit also has serious economic
costs for China. It represents both brain drain and wealth drain. A study
issued by the Center for China and Globalization and the Social Sciences
78. Pia Orrenius, Madeline Zavodny, and Emily Kerr, Chinese Immigrants in the U.S. Labor
Market: Effects of Post-Tiananmen Immigration Policy, Institute for the Study of Labor (IZA)
Working Paper 6287 (January 2012), p. 2.
79. Wei Shen, China in the Global Migration Order: Historical Perspectives and New Trends,
Asia Europe Journal 8:1 (2010), p. 34.
80. Hooper and Batalova, Chinese Immigrants in the United States; Peter Li, The Rise and
Fall of Chinese Immigration to Canada: Newcomers from Hong Kong Special Administrative
Region of China and Mainland China, 19802000, International Migration 43:3 (2005), pp. 934.
81. Jie Chen and Bruce Dickson, Allies of the State: Chinas Private Entrepreneurs and Democratic
Change (Cambridge, MA: Harvard University Press: 2010).; Tsai, Capitalism without Democracy.
82. Hurun Report and Visas Consulting Group, Immigration and the Chinese HNWI.

648  ASIAN SURVEY 56:4

Academic Press found that in 2011 alone, Chinese HNWIs transferred RMB
2.8 trillion ($458.3 billion) of their RMB 33 trillion ($5.45 trillion) out of the
country. This represented a loss of 3% of the GDP for the Chinese economy.83
Thus, while the regime may receive some minor political benets from the
ight of some dissidents, it suffers mightily from the loss of economic resources
and human capital.
As noted by Hirschman, the practice of exit is self-reinforcing; once this
avoidance mechanism for dealing with disputes or venting dissatisfaction is
readily available, the contribution of voice . . . to such matters is likely to be
and remain limited.84 In other words, the normalization of exit as the
preferred behavior for dealing with serious grievances means that afuent
citizens will generally not engage in meaningful dialogue with the regime,
much less confront it and demand fundamental political reforms. Having
built up their fortunes, they seek neither to bolster the regime nor to challenge it; instead, they simply transfer substantial assets overseas and then
leave. While exit has become a normal course of action for Chinas HNWIs,
it has not been readily accessible to most Chinese citizens, who lack the
knowledge of emigration and immigration procedures, cannot afford to participate in immigrant investor programs, and balk at the general cost of
international migration. With exit blocked, middle- and working-class Chinese
have increasingly opted for voice. This is manifested in the growing number of
mass incidents (unauthorized gatherings that threaten social stability), rising
from 10,000 in 1994 to an estimated 180,000 in 2010.85 Notably, such mass
incidents have become increasingly common across Chinese society. Major
protest groups have included not only rural peasants, factory workers in
state-owned enterprises, and displaced city residents, which collectively made
up about half of all mass incidents from 1997 to 2007; there are also emergent
protest groups such as workers in foreign direct investment enterprises, whitecollar professionals, college students, and city residents challenging various
83. Hou Liqiang, Chinese Transfer $458.3 Billion Overseas in 2011, China Daily, January 22,
2014, <http://europe.chinadaily.com.cn/business/2014-01/22/content_17253790.htm>, accessed May
29, 2015.
84. Hirschman, Exit, Voice and the State, p. 95.
85. Tom Orlik, Unrest Grows as Economy Booms, Wall Street Journal, September 26, 2011,
<http://www.wsj.com/articles/SB10001424053111903703604576587070600504108>, accessed June 1,
2015; Joseph Kahn, Pace and Scope of Protest in China Accelerated in 05, New York Times, January
20, 2006, <http://www.nytimes.com/2006/01/20/international/asia/20china.html>, accessed June 1,
2015.

HESS / THE FLIGHT OF THE AFFLUENT IN CHINA  649

public policies.86 Thus, while there has been an increased use of voice among
working- and middle-class citizens, there has also been normalization in the use
of exit by extremely afuent citizens. Popular political action in China has thus
become bifurcated, presenting the regime with a situation where it must
contend with both voice from the bulk of the citizenry and exit from wealthy
citizens who control the bulk of societys material resources. With political
engagement growing among the working classes while the wealthy exit, the
political balance may eventually shift in favor of more redistributionist policies.
These in turn might propel even further wealth ight.
These developments present complex challenges to the CCP. As noted by
Hirschman, groups that are losing valuable members and resources to the
superior management of other groups may attempt to stem the practice of
exit by improving their own performance.87 The CCP, in this view, might
accept the feedback of wealthy emigres and seek to address their grievances.
Following the existing pattern established with HNWIs and highly skilled
academics in the overseas Chinese diaspora, Beijing will also likely continue
and possibly intensify its efforts to recruit overseas wealth and talent and
motivate their return, using economic and non-economic inducements as has
occurred with many haigui (overseas returnees).88
The problem, however, is that the grievances of the HNWIs, as indicated
in recent surveys,89 are issues that the party cannot readily remediate with
short-term actions or material incentives. These push factors include environmental degradation, a consumer-safety crisis, and threats to public health.
Moreover, party efforts to stem capital ight have been readily circumvented
by well-resourced HNWIs; restricting the transnational movement of
HNWIs would likewise be problematic for Chinas highly globalized economy, which is now characterized by high levels of both inward and outward
investment. More recent efforts to reduce corruption within the ranks of
Chinese society and the state have also created anxiety among ofcials and
afuent private citizens, suggesting that such measures will only exacerbate
86. Chih-jou Jay Chen, Growing Social Unrest and Emergent Protest Groups in China, in Rise
of China: Beijings Strategies and Implications for the Asia Pacic, ed. Hsin-Huang Michael Hsiao and
Cheng-Yi Lin (New York: Routledge, 2009), pp. 8896.
87. Hirschman, Exit, Voice and the State, p. 95.
88. David Zweig, Chen Changgui, and Stanley Rosen, Globalization and Transnational Human
Capital: Overseas and Returnee Scholars to China, China Quarterly 179 (September 2004), pp. 735
757; Zweig and Wang, Can China Bring Back the Best?
89. Hurun Report and Visas Consulting Group, Immigration and the Chinese HNWI.

650  ASIAN SURVEY 56:4

the problem of wealth drain. An additional problem emerges in the form of

popular discontent from middle- and working-class protesters. In an effort to
mitigate the destabilizing impact of popular unrest, the state continues to
increase its domestic spending on internal security, which according to ofcial gures jumped from RMB 183.5 billion ($27.9 billion) in 2004 to RMB
778.7 billion ($118.6 billion) in 2013.90 If capital ight accelerates and causes
increasing damage to Chinas already slowing economybeyond the 3% loss
in GDP experienced in 201191it is possible that Beijing will face a serious
budgetary crisis driven by both the confrontational voice of the middle and
working classes and the exit of Chinas wealthiest citizens. Such cross-cutting
pressures might force the CCP to consider meaningful political reforms as the
only option to avert escalating regime destabilization.

90. National Bureau of Statistics of China, China Statistical Yearbook (2014).

91. Hou, Chinese Transfer $458.3 Billion Overseas.