NSW scraps “Waratah bonds” for Chinese investors

The Australian state of New South Wales is tapping into the wealth of those Chinese millionaires looking for safe destinations to move their ill-gotten wealth as a massive anti-corruption crackdown in China gathers speed.

While on a trip to Hong Kong a couple of weeks ago where he clinched a deal for Australian beef, Andrew Stoner, deputy premier of the Australian state of New South Wales (NSW), also crossed over China, to pitch not beef, but visas for Australians, Business Spectator reported.

On 17 August, two weeks before the Australian press broke the news, the Shenzhen Economic News splashed the headline ''Australian state of NSW no longer requires investment in government bonds for Significant Investment Visa''.

The deputy premier announced to his Chinese audience in Shenzhen that his government would scrap the requirement for overseas investors to buy A$1.5 million out of a total A$5 million in low-risk stable return government 'Waratah' bonds, starting in September.

Returning to Australia, Stoner made the announcement of change saying it was designed to make it easier for Chinese investors and give them more choice.

According to an analysis from the real estate advisory arm of Korda Mentha earlier this year, the scheme brought in at least A$440 million to the Australian economy, or around A$4 million per day in 2013.

According to David Chin, managing director of BasisPoint and an SIV expert, the move meant investment providers now had a greater incentive to promote NSW, as the Chinese would now have $5 million to invest rather than the $3.5 million after investing in Waratahs.

He said it would provide a level playing field between NSW and other Australian states to attract SIV investors.

The move comes after concerns that the NSW government was losing applicants to Victoria.

The decision would make it easier for overseas applicants to invest in NSW.

Stoner said from 1 September applicants seeking NSW nomination would be able to invest 100 per cent of their funds in investments of their choice.

According to Stoner, nominations would no longer be tied to a minimum investment in NSW Waratah bonds.

A recent report by Shanghai research firm Hurun, revealed that 64 per cent of Chinese people worth over $1.6 million were either getting out of the country now, or were planning to do so, Business Spectator reported.

What the survey did not mention was a major factor behind the mass exodus of China's wealthy was the sweeping crackdown on corruption that had been underway since late 2012, the report said.

For many of those corrupt officials and businessmen, cheaper options with less stringent requirements had started to emerge in cash-strapped European countries.

According to Jonathan Sykes, Spain, Greece and Portugal were now offering citizenship in return for investments into real estate of over €500,000.

He added, others like Hungary offered almost instant permanent residency in exchange for investments in government bonds.