No Place to Hide

Editorial in The Hindu

The tag line for India’s much-acclaimed transparency law could well be: good for others, not for me. The Supreme Court loftily decreed the right to information to be a part of the fundamental right to free expression. It nonetheless resisted the application of the Right to Information Act, 2005, to itself, and went in appeal to a lower court against a decision in this regard by the Central Information Commission. The apex court has since relented somewhat and placed the assets of its judges in the public domain. It might be a harder battle to bring political parties to account judging by early reactions to Monday’s CIC order deeming them to be public authorities under the RTI Act. Foreign Minister Salman Khurshid, for one, was clear that the law could not be allowed to “run riot,” whatever that means. In the past, Prime Minister Manmohan Singh has weighed in on the side of privacy in the RTI debate, arguing that the law in practice had become too intrusive. Significantly, the Association for Democratic Reforms which petitioned the CIC on bringing political parties under the RTI Act, has made the opposite case: that lack of scrutiny had led to parties being able to accumulate unexplained wealth running into hundreds of crores of rupees.

The ADR argued that political parties must be treated as public authorities because they receive substantial government support in the form of free air time on Doordarshan and All India Radio during elections, discounted rents for party offices and large income-tax exemptions. The organisation calculated that government subsidies for the two largest parties, the Congress and the Bharatiya Janata Party, alone amounted to Rs. 255 crore. Despite the official largesse, political parties insisted that they were not public authorities and managed not to reveal the source for a large part of their incomes by showing them as small voluntary donations exempt from disclosure. The CIC accepted the petitioner’s contention, and went on to note that the “nature of duties performed by political parties points towards their public character.” There is a double irony here. The BJP, which has threatened to make repatriation of black money an election issue, refused to entertain ADR’s RTI application seeking details of its wealth and assets. The UPA birthed the RTI Act with much fanfare and the legislation holds pride of place in its list of achievements. Yet, thanks to the RTI being harnessed for unearthing scams, the government has found itself debunking a law that is its own creation. With the CIC’s ruling, the political class is bound to unite against a law that has been hugely empowering for the common person.

Needed: An exit policy for bad businessmen

S A Aiyer

Vijay Mallya has not paid employees of Kingfisher Airlines for months, and has defaulted on thousands of crores due to suppliers and creditors. Yet he has just donated three kilos of gold, worth almost one crore, to the Tirupathi temple. In August, he offered 80-kilo gold plated doors to the Kukke Subramanya temple in Karnataka. Possibly he believes that the gods can be bought off in ways that employees and creditors cannot.

How can a man who owes enormous sums to employees and creditors be free to throw gold around like small change? If there were any justice, surely the gold and golden doors should be seized from the temples and handed over to the employees and creditors. Surely they should have first right to Mallya’s assets.

After two decades of economic reform , we have not yet evolved rules that facilitate the exit of poor managements before they ruin a company beyond redemption. Kingfisher Airlines has been ground to the dust by Mallya, a liquor baron who should never have entered this space.

A free-market economy is not just a device giving owners the freedom to sack employees. It is one where creditors and employees have the right to seize a company defaulting on dues, and sack the management. The managing shareholder or promoter is only one of many stakeholders. If he cannot meet his obligations to other stakeholders , they should oust him in a true free market economy. In India, alas, our unreformed regulations and procedures leave promoters in control no matter how big a mess they make.

In the US, creditors can quickly seize a company that defaults on dues, and reorganize or sell it to a new owner . The owner can get temporary protection from creditors through Chapter 11 proceedings. In this, a judge determines whether the company is so far gone that it must be liquidated, or whether it can be saved through mutual sacrifices by creditors, employees and owners. In the process, the judge can change the owner. So, often workers survive bankruptcy proceedings , but the owner does not. That is what we should aim for in India too: an exit policy for incompetent, defaulting owners.

Kingfisher Airlines never made a profit, not even in the boom years when its rival airlines were profitable. Creditors should have moved in years ago when it became clear that the skills of a liquor baron were irrelevant for an airline. But in India creditors cannot quickly seize a company, least of all when the owner has political clout (as in Mallya’s case).

In the old licence permit raj, banks and financial institutions had to support existing managements and keep rescuing them. This has not changed despite the 1991 reforms. Banks have to keep throwing good money after bad.

Today Kingfisher is so worthless that it no longer makes sense to seize it and find a buyer. SBI Chairman Pratip Chaudhuri estimates that rehabilitating Kingfisher will cost a billion dollars. Nobody will do so — a new airline can be started for maybe just $100 million. Kingfisher has just lost its flying licence. Mallya’s hopes of being rescued by Etihad Airways of Abu Dhabi look like pure fantasy.

Even if it makes no sense to seize the airline today, why not seize his liquor business? Why not seize his prize luxury possessions, ranging from paintings to yachts or jets? Why not take over his cricket team, Royal Challengers ? Why not take over his football team Mohun Bagan, and his Formula 1 racing team Force India? Why is he allowed to keep all these, along with gold that he donates to temples, when he says he doesn’t have enough to pay employees or suppliers? He has given personal guarantees to banks: why are these not being enforced?

Mallya can be congratulated on one thing. Service was top-class in Kingfisher , and the airline gained a good reputation for quality. Had the airline been seized early on, it could definitely have been sold to a new owner. However , its reputation has steadily fallen with its continuing financial crisis, leading to cancelled flights and official grounding.

I constantly hear that India has gone in for neo-liberal policies. That’s pure rubbish. Neo-liberalism would have given employees and creditors the right to quickly seize and sell a company that cannot meet its obligations. The problem is not liberalism but the continuing old illiberalism that keeps promoters in charge, forcing other stakeholders to take a hit. Temples and religious trusts can keep enormous donations from defaulters instead of handing them over to others who, in all justice, should have the first right to such money or gold. This area desperately needs reform.

Robert Vadra - Rent Seeker or Entrepreneur?

Property empire was built on soft loans handed out in unusual circumstances, documents show

In February, as rumours of the ambitions of Congress president Sonia Gandhi’s son-in-law swirled amidst the heat and dust of the election campaign in Uttar Pradesh, her daughter Priyanka moved to scotch speculation about Robert Vadra’s possible political future.

“He’s a successful businessman,” the younger Ms. Gandhi said of her husband, “who is not interested in changing his occupation.”

Even though Mr. Vadra has increasingly emerged in the public eye, there has been little information on just how successful a businessman he is — and how his empire was built.

Last year, The Economic Times first wrote about his “low-key entry into the real estate business” with the help of DLF Ltd, India’s largest commercial property developer. And on Friday, Arvind Kejriwal and Prashant Bhushan of India Against Corruption (IAC) released documents which showed how Mr. Vadra has acquired land assets in and around the National Capital Region worth hundreds of crores of rupees, sometimes at prices below market value — funded by interest-free loans disbursed to him by DLF and other companies for no apparent reason.

Though the documents reveal no illegality or impropriety on the part of Mr. Vadra, they do raise the question of why DLF — which is a publicly traded company — would enter into multiple business transactions with him on terms that appear highly preferential. The company on Saturday issued a lengthypress release setting out its side of the story but questions of corporate governance remain and minority shareholders are likely to ask the company for the rationale behind its arrangement with Ms. Sonia Gandhi’s son-in-law and whether similar soft loans (or “advances” as DLF prefers to call them) and deals have been transacted with companies owned by other prominent individuals. The answer to the second question may help explain why a normally feisty Opposition has been remarkably silent on the DLF-Vadra connection since the story first broke in 2011.

In 1997, the year Mr. Vadra married Priyanka Gandhi, he incorporated his first, modest business — Artex, which dealt with brass handicrafts and fashion accessories. From 2007, there was a surge in his activities. Inside of a year, he founded five other ventures, spanning the real estate, hospitality and trading sectors.

Ms. Gandhi maintained a distance from these companies: in 2008, she dissociated herself from the sole business in which she was involved, aircraft charter firm Blue Breeze Trading.

From balance sheets and directors’ reports released by IAC and additional papers obtained by The Hindu, which relate to six group companies, it is clear that Mr. Vadra’s rise was meteoric. In 2007-2008, his companies started out with promoter funds of just Rs. 50 lakh.

However, the companies succeeded in acquiring 29 high-value properties by 2010, armed with loans and advances of Rs. 80 crore from DLF,… as well as Bedarwals Infra Projects, Nikhil International and VRS Infrastructure. These included a Rs. 31.7 crore acquisition of a 50 per cent share of Saket Courtyard by 2010, armed with loans and advances of Rs. 80 crore from DLF, as well as Bedarwals Infra Projects, Nikhil International and VRS Infrastructure.

These included a Rs. 31.7 crore acquisition of a 50 per cent share of Saket Courtyard Hospitality, which owns the 114-bed Hilton Garden Hotel in New Delhi; a 10,000 square foot penthouse, number B1115, at the DLF Aralias complex for Rs 89.41 lakh; 7 apartments in DLF Magnolia for Rs. 5.2 crore; apartments for Rs. 5.06 crore at DLF Capital Greens; and a DLF-owned plot in Delhi’s ultra-posh Greater Kailash II area for Rs. 1.21 crore. Though DLF’s press release said some of these prices were “completely incorrect,” the investment numbers are all stated in the balance sheets filed by Mr. Vadra’s companies with the Registrar of Companies.

Then, at the end of 2010, Mr. Vadra’s companies also picked up a bouquet of rural properties: 160.62 acres of agricultural land in Bikaner for Rs. 1.02 crore, and Rs. 2.43 crore for an additional 5 parcels of land of unknown acreage; land at Manesar, on Delhi’s fringes, for Rs. 15.38 crore; land at Palwal for Rs. 42 lakh, land at Hayyatpur, in Gurgaon, for roughly Rs. 4 crore; land at Hasanpur for Rs. 76.07 lakh; land at Mewat for Rs. 95.42 lakh; unidentified agricultural land for Rs. 69.09 lakh; and two ‘other real estate bookings’ worth Rs. 9 lakh.

From just Rs. 7.95 crore in fiscal 2008, Vadra’s fixed assets and investments grew to Rs 17.18 crore in fiscal 2009, jumping a staggering 350 per cent in a single year to Rs 60.53 crore in fiscal 2010, the year in which most of these properties were acquired with promoter funds of just Rs. 50 lakh along with interest of Rs. 255.46 lakh earned on advances and loans and zero group activity or profitability.

Despite the high market value of these listed assets (properties), though, the declared investment portfolio in Mr. Vadra’s balance sheets remained a meagre Rs. 71 crore at the end of fiscal 2010 with accumulated group losses of Rs. 3 crore.

Mr. Vadra’s companies did not respond to e-mails sent by The Hindu seeking clarifications on the details of these transactions. In particular, it remains unclear why DLF and other major corporations would have made him large loans, since this is not in the nature of their business. Nor did Mr. Vadra’s companies have any apparent prior specialisation in real estate business.

Financial wizardry

The financial information available from the balance sheets and directors’ reports of Mr. Vadra’s companies — Sky Light Hospitality, Sky Light Realty, Blue Breeze Trading, Artex, Real Earth Estates and North India IT Parks — raise hard questions about what business it is they actually do, and how this business is conducted.

Each of the companies has 268, Sukhdev Vihar, New Delhi, as its common address, and Mr. Vadra and his mother Maureen Vadra as directors. Mr. Vadra, the documents show, receives remuneration of Rs. 60 lakh per annum from just one company, Sky Light Realty. The payment, the company’s auditor states is “remuneration in excess of the limit prescribed under section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules 1975.”

There are no other employee costs in the books, either to his mother or to others. However, in the documents, both directors “place on record their deep sense of appreciation for the committed services of executives, staff and workers of the company.”

Strangely, while assets balloon in each subsequent balance sheet, there is no account of the corresponding enhancement of visible business activity. For example, the balance sheets raise a current liability of Rs. 50 crore against the Manesar land, though it was registered for just Rs.15.38 crore in the same financial year, defying all commercial and financial prudence and raising doubts about whether this was an income rather than a current liability.

A senior chartered accountant told The Hindu on condition of anonymity, given the individuals involved, that masking incomes as loans/current liabilities in this manner is an unorthodox accounting device. “Using short term funding of this kind to create long-term assets defies financial prudence as it constitutes a high business risk, unless they are not really ‘current liabilities’ and are not payable in the short term, which means they are nothing but incomes which have been disguised,” he said. Vadra’s auditors consistently overlook this in all six firms, while accounting firm Khurana & Khurana in its Auditors Report for Real Earth Estates Pvt. Ltd. for the year 2010, actually opts to gloss over this by stating: “Based on the information and explanation given to and on an overall examination of the balance sheet of the company, in our opinion, there are no funds raised on short term basis which have been used for long term investment.”

The auditor’s accounting rigor comes into further question with its statement that according to the information and explanations given to us, the company has, during the year, not granted any loans, secured or unsecured to companies, firm or other parties covered in the register maintained under section 31 of the Companies Act 1956, excepting the advances under business obligation accordingly paragraphs 4 (iii) (a) (b) (c) and (d) of the order are not applicable. However, the balance sheet shows loans and advances of Rs 2.89 crore for the company in 2010.

Many such loans, which reflect as total current liability of Rs. 72 crore in the accounts, are invested in long-term assets like land. Curiously, no one appears to be pressing for the return of these loans — which are, according to the documents, interest-free.

Additionally, all of Mr. Vadra’s companies show interest income from fixed deposits, claiming tax deducted at source for this interest without accounting for the fixed deposits themselves in the balance sheets. The six companies’ profitability, which grew from zero in 2007-8 to Rs. 20.94 lakh in 2008-9 to Rs. 255.46 lakh in 2009-10, was not from any business activity in these companies but purely from interest on 23 elusive fixed deposits amounting to roughly Rs. 5 crore.

There are other unexplained gaps in the financial information. As of March 31, 2010, the group profit and loss account shows that only Sky Light Realty made a profit, and that too in one single year. Yet, while the others show losses, they continue to make investments. This profit of Rs. 244.98 lakh was despite a complete absence of business activity or liquidation/reduction of fixed assets, investments or other bookings. However, the accumulated losses of Rs. 3 crore from the other 5 firms in the RV Group’s 2010 balance sheet wipe out Vadra’s capital and reserves, raising questions about his ability to buy so many high value properties with zero capital.

DLF’s fortunes

Perhaps the key to the relationship could lie in DLF’s troubled fortunes since 2008 — the very time its dealings with Mr. Vadra acquired significant scale. According to a March 1, 2012 report by the respected Veritas Investment Research Corporation, DLF Ltd is an organisation under duress, with its management scrambling to consummate assets sales, rationalize its land bank and divest non-core operations.

Since a May, 2007 Initial Public Offering, which sold at Rs. 525 per share, the stock price declined by 46 per cent in March 2012 compared to a roughly 30 per cent gain in the Sensex over the same period with the stock presently trading at Rs. 241.80, a steep 54.13 per cent dip.

Veritas points to questionable related-party transactions, aggressive and conflicting accounting policies, self-enrichment and inability to deliver on promises, and a balance sheet stretched to the limit, with no free cash flow and no credible plan to de-lever its balance sheet. “If your investment decision incorporates management integrity, then bypassing DLF will be an easy choice,” the Veritas report states.

In addition, Veritas does “not believe the disclosed book equity and asset base of the company,” stating that via its dealings (merger) with DLF Assets Ltd (DAL), from FY 2007 to FY 2011, the company inflated sales by at least Rs. 11,236 crore and its profit before tax by Rs. 7,233 crore.

A slowing real estate market in a high inflation environment and over-exposure to Gurgaon — among India’s most speculative real estate markets — is further expected to create tremendous pressure on the company’s balance sheet. “In the end, we believe DLF will seek assistance from financial institutions to restructure its loans,” the report affirms, urging investors not to buy DLF stock. DLF dismissed the report as “mischievous and presumptive.”

Mr. Vadra himself has attributed his brass-to-gold success story to hard work—and a little help from “family” friends like K.P. Singh, the chairman of the DLF Group. However, Mr. Vadra has strongly denied taking any favours from DLF in the past. “I have a good understanding with DLF. Our children are friends, we are friends. They are seasoned businessmen. They are not daft… They don't need me to enhance them. They’ve existed for years,” he told The Economic Times in March 2011.

Indeed, in January 2002, he made his distaste for favour-seeking capitalism public, dissociating himself from his brother and father, alleging that they were promising jobs and favours using his name and association with the Gandhi family. His father responded by suing him for defamation.

Hard work Mr. Vadra may well have put into building his property empire. But the help he received from friends like DLF suggests at least a part of his success flowed from the willingness of others to bet on the outcome of his enterprise.

Socialism for the Rich

George Monbiot

In the documentary series which finished on Friday evening, the heiress Tamara Ecclestone set out to prove that she isn't "a pointless, quite spoilt, really stupid, vacuous, empty human being". This endeavour was not wholly successful. Channel 5 showed her supervising the refurbishment of her £45m home in London, in which she commissioned a £1m bathtub carved from Mexican crystal, an underground swimming pool complex, her own nightclub, a lift for her Ferrari, a bowling alley with crystal-studded balls and a spa and massage parlour for her five dogs, to save her the trouble of taking them to Harrods to have their hair sprayed and their nails painted. But there was something the series didn't tell us: how much of this you helped to pay for.




In court a fortnight ago, her father, the Formula One boss Bernie Ecclestone, revealed that the fact his family's offshore trust, Bambino Holdings, was controlled by his ex-wife rather than himself could have saved him "in excess of £2bn" in tax. The name suggests that the trust could have something to do with supporting his daughter's attempt to follow the teachings of St Francis of Assisi.



Ecclestone has also been adept at making use of the corporate welfare state: the transfer by the government of wealth and power from the rest of us to the 1%. After the mogul made a donation to Labour's election fund, Tony Blair demanded that F1 be exempted from the European Union's ban on tobacco sponsorship. The government built a new dual carriageway to the F1 racetrack at Silverstone.



In other countries his business has received massive state subsidies. Russia, for example, has recently agreed to build a circuit for Ecclestone to race his cars, and then charge itself $280m for the privilege of letting him use it. Working in India in 2004, I came across the leaked minutes of a cabinet meeting in which the consultancy McKinsey insisted that the desperately poor state of Andhra Pradesh – where millions die of preventable diseases – cough up between £50m and £75m a year to support F1. The minutes also revealed that the state's chief minister had lobbied the prime minister of India to exempt Ecclestone's business from the national ban on tobacco advertising.



Socialism for the rich, capitalism for the poor: that is how our economies work. Those at the bottom are subject to the rigours of the free market. Those at the top are as pampered and protected as Tamara Ecclestone's dogs.



On Tuesday George Osborne decided at last to review the private finance initiative (PFI), under which the companies building public infrastructure made stupendous profits while the state retained the risks. But if you thought that the chancellor's decision represented a wider shift in policy, you'll be sorely disappointed. Two days later he agreed to sell the state-owned bank Northern Rock to Richard Branson. Under the deal, the state keeps the liabilities while Branson gets the assets – rather like PFI. The loss equates to £13 for every taxpayer.



Someone who will not suffer unduly from being touched for £13 is Matt Ridley. As chairman of Northern Rock, he was responsible, according to the Treasury select committee, for the "high-risk, reckless business strategy" which caused the first run on a UK bank since 1878. Before he became chairman, a position he appears to have inherited from his father, Ridley was one of this country's fiercest exponents of laissez-faire capitalism. He described government as "a self-seeking flea on the backs of the more productive people of this world … governments do not run countries, they parasitise them."



The self-seeking parasite bailed out his catastrophic attempt to put his ideas into practice, to the tune of £27bn. What did the talented Mr Ridley learn from this experience? The square root of nothing. He went on to publish a book in which he excoriated the regulation of business by the state's "parasitic bureaucracy" and claimed that the market system makes self-interest "thoroughly virtuous".



Having done his best to bankrupt the blood-sucking state, he returned to his family seat at Blagdon Hall, set in 15 square miles of farmland, where the Ridleys live – non-parastically of course – on rents from their tenants, handouts from the common agricultural policy and fees from the estate's opencast coal mines. No one has been uncouth enough to mention the idea that he might be surcharged for part of the £400m loss Northern Rock has inflicted on the parasitic taxpayer. It's not the 1% who have to carry the costs of their cockups.



Even in the midst of this crisis, when the poor are being hammered on all sides, the government still seeks to transfer their meagre resources to the rich. Last month the business department listed five employment rules that businesses might wish to challenge. Among them were the national minimum wage and statutory sick pay.



On Friday, David Cameron opened negotiations with Angela Merkel over the eurozone crisis. His two principal demands were that there should be no "Robin Hood tax" on financial transactions and that the working time directive, which prevents companies exploiting their staff, should be renegotiated.



Just as instructive was what he did not discuss. In fact, as far as I can tell, none of the European leaders have yet mentioned it in their summits, even though it accounts for almost half the EU's spending. It is of course the agricultural subsidy system, which now costs British taxpayers £3.6bn a year.



We like to imagine this money supports wizened shepherds who tie up their trousers with bailer twine, but the major beneficiaries are people like the Ridleys. The more land you own, the more support you receive from the state.





The common agricultural policy is a massive state subsidy to the richest people in Europe: the aristocrats and plutocrats who possess the big holdings. British politicians pretend that it is protected only by the French. This is bunkum: in February a House of Commons committee demanded not only that the existing subsidy system be sustained but also that we should reinstate headage payments, encouraging farmers to produce food nobody wants.



Last week the Guardian exposed a system which looks like state-enforced slavery. To qualify for the £53 a week they receive in jobseeker's allowance, young people are being forced to work without pay for up to eight weeks for companies such as Tesco, Poundland, Argos and Sainsbury. Some of the nation's poorest people, in other words, are being obliged by the state to subsidise some of its richest businesses, by giving them their labour.



For the corporate welfare queens installing their crystal baths, there is no benefit cap, no obligation to work, in some cases no taxation. Limited liability, offshore secrecy regimes, deregulation and government handouts ensure that they bear none of the costs their class has inflicted on the rest of us. They live at our expense, while disparaging the lesser mortals who support them.



A fully referenced version of this article can be found on wwwmonbiot.com

China's richest keep firm eye on exit door

By Olivia Chung

HONG KONG - "Get rich - then get out" is the life message being grasped by China's wealthiest citizens two decades after former leader Deng Xiaoping supposedly declared that "to get rich is glorious".

About 60% of rich Chinese people intend to migrate from China, according to a report jointly released by the Hurun Report, which also publishes an annual China rich list, and the Bank of China. A separate study by US-based Bain & Company and China Merchants Bank in April of 2,600 high-net worth individuals - those who hold more than 10 million yuan (US$1.6 million) in individual investable assets (excluding primary residences and assets of poor liquidity) - found that about 60% of those interviewed had completed immigration applications to other countries or had plans to do so.

About 14% of the rich Chinese people, each of whom has a net asset of more than 60 million yuan, said they had either already moved overseas or applied to do so, according to the Hurun findings, which were based on one-on-one interviews with 980 rich Chinese people in 18 mainland cities from May to September.

Another 46% said they planned to emigrate within three years, variously citing higher-quality education available for their children overseas, better healthcare, concerns about the security of their assets on the mainland and hopes for a better life in retirement.

The most favorable destinations by rich Chinese is the US, with 40% of respondents claiming it was their first choice, followed by Canada and Singapore. Encouraging them in their quest, the United States continues to lower its threshold for businesspersons’ immigration.

Some 70% of the 4,218 visas issued under the US Immigrant Investor Program, known as EB-5 visas, issued in 2009 were applicants from China, data from the US Department of State show. In 2010, more than 70,000 Chinese applicants obtained permanent residency in the US, accounting for 7% of total applicants, placing second behind only Mexican applicants, according to the US Department of Homeland Security.

Canada allocated more than 1,000 of its targeted 2,055 immigrant investors to Chinese people in 2009 and last year, 2,020 Chinese applicants obtained permanent residency in Canada through investment, accounting for 62.6% of the total immigrant investors to Canada, data from Citizenship and Immigration Canada showed.

Kathy Cheng, an investment immigration consultant based in Shenzhen, next to Hong Kong, attributed the popularity of the US to it not having a cap on its investment visa program. The minimum amount required for investment immigration to the US is $500,000, and among all destinations that offer investment immigration, the US is alone in not imposing a quota.

“Recently, the US is trying to overhaul the immigration laws to attract rich or high-skilled foreigners. The moves have attracted the attention of some wealthy Chinese, who can afford to live elsewhere," she said to Asia Times Online by telephone.

Two US senators, Democratic Chuck Schumer and Republican Mike Lee, last month introduced a bill that would give residence visas to foreigners who spend at least US$500,000 to buy houses in the country. The proposal would allow foreigners immigrating to the United States to bring a spouse and any children under the age of 18. The provision would create visas that are separate from current programs so as to not displace anyone waiting for other visas.

The US Ambassador to China, Gary Locke, the former US commerce secretary who took on his latest post in August, said the US will make its investment and commercial environment as open and appealing as possible to increase Chinese investment in the US to create more jobs for Americans, which is the foremost priority of the Barack Obama administration.

"We will help Chinese companies and entrepreneurs better understand the benefits and ease of investing in the US by establishing factories, facilities, operations and offices," Locke told US business leaders in Beijing in September.

In May, President Obama said the US needs to overhaul its immigration laws to secure high-tech foreign talent to address a shortages of scientists and experts in the high-technology sector. In the same month, the Obama administration extended the Optional Practical Training program to allow students graduating in fields that include soil microbiology, pharmaceuticals and medical informatics, to be able to find a job or work in the US for up to 29 months (instead of 12) after graduation.

New York City Mayor Michael Bloomberg said recently at a Council on Foreign Relations event in Washington, that to spur job growth, the US should allow foreign graduates from US universities to obtain green cards (permanent residency), ending caps on visas for highly skilled workers, and setting green-card limits based on the country's economic needs not an immigrant's family ties.

Of the 980 people interviewed by Hurun Report and the BOC, about 35% said they have assets overseas, which on an average accounted for 19% of their total assets; 32% of those surveyed said they have invested overseas with a view to emigrate and half said they did so mainly for the sake of their children's education.

A mainlander who has manganese mines in his home province of Guangxi said he was applying to emigrate to Canada from his home region in southeast Guangxi, mainly due to take advantage of better education overseas for his two-year-old son.

"An increasing number of parents in China prefer their children to receive education overseas instead of with the examination-oriented education system in China," said the mine owner, who asked not to be identified.

However, a source close to him said the mine owner had assets worth millions of dollars and "underground" businesses; given changeable government policies, emigration was the best way of protecting some of this wealth.

"Despite Beijing's currency rules, the wealthy have many ways to move their money out of the country. Besides, part of his money comes from smuggling, though his business is far smaller than Lai Changxing," said the source.

Lai Changxing was extradited to China from Canada in July after a 12-year exile there. He is expected to face charges for smuggling to a value of US$10 billion, bribery and tax evasion.

Under Beijing's capital rules, anyone leaving China can carry with them a maximum of 20,000 yuan (US$3,100) or the equivalent of US$5,000 in foreign currency. However, it is commonly known that wealthy Chinese are free to leave the country with briefcases full of cash.

Ye Tan, an independent economist and commentator in Beijing, said the growing gap between the rich and the poor in the mainland, which has aroused discontent among the less well off, has made some of the wealthy feel uncomfortable.

"The lack of security sense about the safety of their assets among Chinese wealthy is like a huge black cloud hanging over their heads," Ye was quoted as saying in the Hurun survey report.
China has 960,000 "yuan millionaires" with personal wealth of 10 million yuan (US$1.5 million) or more, according to the GroupM Knowledge - Hurun Wealth Report 2011. The figure is up 9.7% from a year earlier. China has 60,000 "super rich' with 100 million yuan or more, up 9% on a year earlier.

Average monthly income in China is only about 2,000 yuan, despite double-digit economic growth for about the past three decades.

China's Gini coefficient, a commonly used measure of wealth inequality, reached 0.47 in China last year, according to the National Development and Reform Commission, above the international warning level of 0.4, which is considered to be the level that could trigger social unrest.