
The Golden Generation: Why China’s super-rich send their children abroad - wallflower
http://www.newyorker.com/magazine/2016/02/22/chinas-rich-kids-head-west
======
A_fow
I live on Vancouver Island (short boat ride from Vancouver). This year I will
graduate with a degree in computer science and already have a decent job
working as a web developer. My wife has a well paying job with the government.
We both have lots of family and friends in Vancouver but will likely never
live there as we can't afford $700,000 for a starter home. Even here on
Vancouver Island it seems the possibility of owning our own home is becoming
unattainable as prices sky rocket. Something needs to be done about foreign
investment.

I guess this happens all over the world. The rich get to live in the nicest
cities and everyone else gets pushed out. I've lived here my whole life but
soon I won't be able to call it home. I can't read many of the street signs in
Richmond (Cantonese and Mandarin). I take the bus to University while some of
my Chinese classmates drive their Maserati/Lambo/Mercedes. It feels like my
home is being sold out from underneath me to the Chinese. I don't know how to
solve this or even approach talking about it without offending people. Maybe I
need to open my mind and not view this as a problem. But it makes me very sad
to feel like I don't belong in the place where I grew up.

~~~
jseliger
_Even here on Vancouver Island it seems the possibility of owning our own home
is becoming unattainable as prices sky rocket. Something needs to be done
about foreign investment._

Not really. Something needs to be done about parochial land use laws that
prevent supply from rising to meet demand: [http://www.amazon.com/TheRent-Too-
Damn-High-Matters-ebook/dp...](http://www.amazon.com/TheRent-Too-Damn-High-
Matters-
ebook/dp/B0078XGJXO?ie=UTF8&tag=thstsst-20&linkCode=as2&camp=1789&creative=390957).
Until that happens, prices will rise. Despite many efforts to the contrary,
you cannot legislate away supply, demand, and prices.

Preventing new development appears to have really taken off in the 1970s,
according to Chapters 7 and 8 of William Fischel's _Zoning Rules!_ :
[http://www.amazon.com/Zoning-Rules-Economics-Land-
Regulation...](http://www.amazon.com/Zoning-Rules-Economics-Land-
Regulation/dp/155844288X). Until we reverse that dynamic (or make cities less
attractive places to live) we're going to see rising prices.

~~~
roymurdock
I think increasing supply is a good idea in the short run, but in the long
run, I think the answer lies more in changing the way society views real
estate.

As the article makes clear, real estate is increasingly viewed as an asset
that can simply be purchased and held on to diversify a risky portfolio.
Foreign property owners add little to no value (in a true, human, social
sense) to the greater society. They do contribute tax revenue, but at the
expense of making real estate unattainable for others by driving up prices.

Real estate used to be the center of a business owner's livelihood or a
family's multi-decade investment in an area with family, good schools, a good
community, etc.

While increasing supply would reduce price, foreign investors would simply
purchase more. Demand for (perceived) stable assets to offset market
volatility is at an all time high, especially in China where many are trying
to export wealth.

When the market crashes, you'll have an oversupply of property that was built
for people who did not actually inhabit the area.

~~~
andrewjl
Given the current supply constraints in that market, it will take a very long
time to build up a level of inventory that will cause a crash. The solution to
the problem you're describing is more units, not less.

Also, this transition in real estate's role is a result of globalization.
Without some kind of capital controls it's very hard to undo it's effects.
Your best bet is a supply-demand oriented solution.

~~~
roymurdock
When I talk about a crash, I mean a global correction in property and equity
market values akin to the correction post-financial crisis. This would
probably be triggered by a withdrawal of liquidity from public markets due to
non-performing debt, or simply a prevailing market sentiment that investments
have been channeled into the wrong assets following the great recession - not
enough gov investment into TFP-raising infrastructure and decreasing lack of
aggregate demand is a recipe for stagnation.

I don't see a mechanism whereby an increasing level of inventory causes a
crash. I'm saying that when a crash happens, we'll be left with wasted excess
capacity as investors rush to sell off ill-thought out high rise complexes,
micro apartment buildings, second and third homes they can no longer afford to
pay taxes on, etc.

~~~
andrewjl
The North American correction in property values post the 2008 financial
crisis was due to two factors: 1) Increase in inventory levels as subprime
borrowers tried to exit their mortgage via a fire sale 2) Total shut down of
the mortgage markets, meaning only cash buyers could get deals done.

Given the profile of the typical buyer at the high end of the market in
Vancouver, an outsized effect like the one described above is unlikely. These
homes are not mortgaged and their owners have savings they draw upon instead
of income from employment. Job losses a la 2008 do not affect them as much.
For these reasons I doubt we will ever see the kind of corrections in
Vancouver like we saw in places like Phoenix and Las Vegas in 2008.

Finally, a somewhat normative question, what's wrong with cheap housing? I
agree with you that ill-thought out planning is detrimental to the city's
quality of life. But to me at least it seems that the planning and permitting
process is overly restrictive.

------
nugget
One of the paragraphs that stood out to me the most:

I asked Bing Thom about the changes. The property boom has, of course, been
good for the architectural profession, but Thom, who is now in his early
seventies, is troubled by what is happening to his home town. “By all
accounts, I have done pretty well in my business, but I made more money from
sitting on my Vancouver property than I made by working an entire lifetime,”
he said. “That tells you something.”

~~~
maxxxxx
Isn't that where we are heading generally? Working gets turned into a
commodity and only the people with capital receive economic gains?

~~~
eru
It's not capital. It's land. Returns on capital are also pretty low.

~~~
nugget
Eru beat me to the answer. Since the 1970s we witnessed a bunch of major
trends: interest rates (lending costs) drop near 0, household incomes increase
significantly due to women entering the workforce, continued urbanization, and
rapid population growth. All of these trends supported massive appreciation of
land and real estate. My perspective on this is that (especially urban)
landowners were beneficiaries of an economic lottery that is unlikely to
reoccur in our lifetimes.

------
roymurdock
Really fascinating article that spans a wide range of characters. Touches on a
lot of important points:

    
    
      Fuerdai come from the 2%, the 1% are comfortable in China and do not need to export wealth
      Extreme poverty is only 1-2 generations away for many Fuerdai
      "Astronaut" dynamic where father sends child/wife to establish home abroad
      Spoiling children of the elite due to an apprehension of their coming of age
      Vancouver has become a "hedge city" against volatility at home
      State is addicted to tax revenue from international buyers
      "City has become a hotel" and "countries are selling citizenship"
      Fuerdai caught between Western and Chinese culture, belong to neither
      

Author ends the piece with this quote from a Weymi, a fuerdai: [In reference
to Weymi's mother] _She didn’t want to be like her mom or older sister, always
gossiping about those in the village a smidgen better off than themselves.”
Weymi put down her chopsticks. “It’s that kind of typical provincial
pettiness, but that was her entire life if she had stayed.” She shook her head
and drew a breath. “I mean, can you just imagine? "_

The irony is deliciously tangible. Great piece with a lot to think about and
chew on.

------
Animats
From the article: _" The Chinese are currently transferring money out of the
country at a rate of around four hundred and fifty billion dollars a year.
Most of that money has gone into real estate."_ It's not just looking for an
economic safe haven. There's fear of having too much money in China. As the
article points out, within a few years of appearing on Forbes' list of the
richest people in China, the Government of China tends to do something
negative to those people.

Much of the buying is in a small number of places: London, New York, San
Francisco. The impact there is huge.

The US built 965,700 housing units (this includes apartment units) in 2015.

~~~
dmix
Toronto and Vancouver would likely be at the top of the lists of chinese real
estate investment.

Toronto had more condo buildings being built a few years ago than any other
city in the world outside of a few cities in China. Something like 10x more
than Chicago which was the #1 in the US for building construction.

I know quite a few people living in them who talk about how they are empty
most of the time except when the Chinese owners children come to visit.
Renting isn't always viable since there is a glut of condos available. Housing
prices continue to go up there while condo prices actually went down for the
first time in forever.

------
mk00
I am student at UC Irvine. I genuinely believe there is a back-door allowing
these kids to buy their way in. You can't believe the lack of skills and
extravagances you see. I saw someone offering $250 for anyone to drop a
specific class, so that room would open. I suspect fake degrees. There has
been numerous instances of Paid Test Takers. Most classes we literally now
have to show our ID when we turn in a test, as a result of this cheating

~~~
philippnagel
In Germany it is mandatory (at least that's my experience) to identify oneself
with one's ID or driver's license when taking a test at uni.

Is there no such procedure at US institutions?

~~~
dagw
If you're willing to pay someone to take a test for you, you are probably also
willing to pay for a fake ID for them. Or you could find someone who looks
close enough to you and hope that no one looks too closely.

------
bobby_9x
Why wouldn't you transfer your money out of China?

Billionaires are going 'missing' every month and the government can pretty
much take over your business and take all of your money, for any reason.

To make any kind of money there, you need to pay huge bribes.

------
stevesun21
Don't put hate on people with money and speak different language you don't
understand, my constructive suggestion for you is that earn it by yourself.
Guess what, these richest people also pay the most expensive tax in Canada,
and you are welcome.

------
jarek
> It feels like my home is being sold out from underneath me to the Chinese.
> ... But it makes me very sad to feel like I don't belong in the place where
> I grew up.

Don't worry. If how the English treated First Nations is any guide, you'll get
a reservation at the end of the day.

(Really brief history for those from outside the region: ethnic-Europeans have
been ruling British Columbia for less than two hundred years.)

~~~
adventured
> If how the English treated First Nations is any guide, you'll get a
> reservation at the end of the day.

Only if your vast assumption about China is correct, which it isn't. Their
economy is in free-fall.

China's imports just collapsed by 19% in January, exports collapsed by 11%.
Trillions of dollars of capital is rapidly fleeing their economy. Their
government is in the midst of an extraordinarily violent and widespread
crackdown on individual liberty, murdering billionaires and disappearing high-
level executives and journalists. And they're going to have to dramatically
devalue their currency, which will have the effect in real terms of slicing
their economy down to size, including their wealth.

I'm not worried about your premise in the least.

~~~
maxerickson
Where's a good place to read about the crackdown on the wealthy and
executives?

~~~
wavefunction
[http://lmgtfy.com/?q=chinese+crackdown+on+wealthy](http://lmgtfy.com/?q=chinese+crackdown+on+wealthy)

~~~
maxerickson
Gee, thanks. How many of those articles do I have to skim to see if they
mention a murdered billionaire to satisfy you?

This one at least mentions disappeared billionaires (if the first 3 do, I
missed it):

[http://www.cbsnews.com/news/chinas-crackdown-on-graft-
media-...](http://www.cbsnews.com/news/chinas-crackdown-on-graft-media-
obscures-picture-for-investors/)

But that could be detainment. And it doesn't go into executives.

Of course you are right, I was just being lazy, but I was trying to be smarter
about it than typing an obvious search into Google and reading dozens of
articles with the hope that I found one informing me about the claims made by
someone I've in the past observed to be interested in the news.

