WHAT ASPECTS HAVE CHINESE CLIENTS DIFFERENTIATED THEMSELVES WITH THOSE IN
MORE ESTABLISHED MARKETS
A disƟncƟon has to be made between 1st generaƟon and 2nd generaƟon Chinese clients.
The 1st generaƟon Chinese clients are very conservaƟve and risk averse and quite skepƟcal
about different asset classes in terms of their investments. They would prefer to stay in
cash and money market instruments, some real estate and stock markets. The second
generaƟon Chinese clients like presƟge and are quite spendthriŌ. They tend to spend a
lot on western branded luxury goods.
Both generaƟons of Chinese Clients like to maintain a certain degree of control over
assets and the way they are managed, even if those assets have been transferred to a
fiduciary structure, for example, a discreƟonary trust. If the SeƩlor of a discreƟonary
trust starts to instruct the trustees as opposed to making requests to them, this could
lead to the trust being qualified as a sham and the whole structure being jeopardised.
IMPACT OF INHERITANCE TAX (IHT) ON WEALTH PLANNING OF THE RICH IN CHINA AND
POSSIBLE CONSEQUENCES OF ADOPTION
IHT is levied on someone who inherits money or property. New IHT regulaƟons have
recently been proposed by the Chinese Government. IHT, if introduced in China, can have
both posiƟve and negaƟve effects. On the one hand, it will reduce the widening wealth
gap and social inequality that currently exists in the Country, whilst if applied on a too low
threshold, it can become a burden on the middle class Chinese. The introducƟon of IHT
can also lead to tax avoidance, offshoring of assets and other arrangements, life insurance
for instance and ulƟmately, emigraƟon of the wealthy Chinese to other countries.
INTERVIEW
Yogesh Gokool, Head of InternaƟonal Banking, Trusts and Custody, present at the 3rd Annual
China Offshore Summit
Yogesh Gokool, Head of InternaƟonal
Banking, Trusts and Custody
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WHAT CAN OFFSHORE WEALTH STRUCTURES OFFER TO
MAXIMISE THE GROWTH AND VALUE OF FAMILY WEALTH IN
TERMS OF OWNERSHIP, CONTROL OF BUSINESS AND TRANS-
GENERATION SUCCESSION?
According to a recent Bank of China report, it is believed that
20% of Chinese Wealth is held through offshore structures.
Chinese offshore investments have doubled since 2011. The
offshoring of assets could provide risk diversificaƟon to Chinese
clients; their invesƟng in different classes of assets from real
estate and stock markets to alternaƟve investments and
Private Equity. In addiƟon, offshoring of assets and the use of
offshore structures can miƟgate currency risk if done through
a jurisdicƟon where there is no exchange control, as is the case
for MauriƟus. Chinese clients will thus be able to switch their
assets in different currencies and not have ‘all their eggs in one
basket’.
Last but not least, offshore structures provide protecƟon from
poliƟcal instability and the expropriaƟon of assets risk, i.e. the
state taking possession of private assets as we have seen in
many countries in the past.
WHAT IS SUBSTANTIAL RANGE OF RISK ASSOCIATED WITH
OFFSHORE WEALTH PLANNING?
The choice of the professional trustees and service providers
is very important. One would not want to give one’s assets to
anyone to structure/ manage unless they are well regulated,
properly licensed and have the knowledge, experience and
background. In addiƟon, some offshore jurisdicƟons are
blacklisted by the OECD and the FATF. Would clients be
comfortable in having their assets held by structures set up
and managed in those jurisdicƟons?
WHAT ARE THE COMMON PITFALLS IN PROCESSING INTER-
GENERATION WEALTH TRANSFER AND HOW TO WORK WITH
PRIVATE CLIENTS PROPERLY FOR SOLUTIONS?
I do not think Clients would want their future generaƟons
to end up with a huge tax burden because a structure has
not been properly set up inter vivos and, is non-compliant. If
assets are held offshore, it is very important to seek legal and
tax advice, which is necessary to ensure proper compliance
both within and outside China.
Chinese clientswill thus be able to switch
their assets in different currencies and
not have ‘all their eggs in one basket’.
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