Glavin: Canada's unhappy affair with China's millionaires
Published on: April 22, 2015
If the Economist Intelligence Unit’s annual top 10 world cities rankings are what you’ve been relying on, you probably weren’t surprised last month when the global human resources outfit Mercer tagged Vancouver on its Quality of Living index as the best city in North America. But you might have been surprised this week when Statistics Canada released a study showing that, by a variety of indices, Vancouverites are the unhappiest people in Canada, falling dead last among the residents of 33 cities across the country.
We like to think of Lotusland’s grand metropolis as a place where people ski, sail, ride their bikes, swim, and hike though lush rainforests, all in the same day. But StatsCan’s annual survey of median household income in Canadian cities routinely puts Vancouver close to the bottom of the heap on that same list of 33 cities, and in January the Demographia International research institute ranked Vancouver second to last in a global survey of 378 cities on its Housing Affordability Survey.
Vancouver’s median household income in 2014 was $66,400, while the city’s median home price was 10.6 times higher: $704,800. Only Hong Kong fared worse, and just barely. Hong Kong also tops Vancouver, again only barely, as the property investment bolt-hole most favoured by Mainland China’s loot-laden millionaires. For years, we’ve been instructed to pretend that this is somehow mere coincidence. You can’t get away with talking to Hong Kongers like that, but Vancouverites take it sitting down.
In happier places like Saguenay, Sudbury and Thunder Bay, there’s manufacturing, dairy farming, forestry and mining, and there’s a high degree of neighborliness and civility. But Vancouverites make most of their money from increases in the real estate value of whatever property they might be lucky to own. This tends to skew any real sense of hometown belonging, and nothing quite so rattles the cages as loose talk about the elaborate, federally-sanctioned swindle that has been keeping the bubble inflated all these years.
It began back in 1986. London and Beijing had just concluded terms for the 1997 handover of Hong Kong to Chinese rule, and in Ottawa, Brian Mulroney’s Conservatives turned their thoughts to finding some Canadian advantage. The hustle that Canada settled on was a scheme to lure skittish Hong Kong capital to Canada. Under Mulroney’s Liberal successors, the Immigrant Investor Program degenerated into an outrageous passport-printing racket. By the time Stephen Harper’s Conservatives were settling into their majority in 2011, there were 300,000 Canadian passport holders in Hong Kong and another 20,000 or so in Mainland China.
During the 21st century’s first decade, more than 18,000 Chinese state-enterprise executives were busted for siphoning money out of China in fake joint ventures, underground money shops masquerading as overseas-study agencies, phoney service gambits and dummy offshore subsidiary accounts. The People’s Bank of China reckons that $126 billion was pilfered in these ways during that decade, and Canadian real estate, and especially property in Metro Vancouver, was one of the main places the money was ending up.
Thus the unhappiness, all occurring right under Parliament’s nose. To give you a sense of how absurdly the taboo had throttled Canadian debates, it’s instructive to recall the rubbish that was uttered when Harper finally got around to shutting it all down last year with a resolve to start from scratch. Vancouver MP Don Davies, the New Democrats’ international trade critic, accused the government of “damaging Canada’s economy and trade relationships.” Then there was Liberal warhorse John McCallum (Markham—Unionville): “Are Conservatives inadvertently picking on Chinese people?”
China’s massive Operation Skynet fraud squad is now rummaging through Vancouver’s real estate industry. British Columbia’s police agencies won’t say whether they’re cooperating, but even if they were, it wouldn’t be easy work. Over its final decade or so, the Immigrant Investor Program drew more than 30,000 Chinese millionaires to British Columbia.
Just one of the unseemly costs of Ottawa’s wheel-greasing for Beijing’s princelings is a sum that might well amount to billions of dollars in no-interest loans that should have gone to British Columbia’s provincial treasury. Instead, the money got spent on thousands of back-door keys the Canada-Quebec Accord made available with a wink and a nod to Chinese millionaires bound for Vancouver, in transit through Montreal.
Contrast that with the marquee billing given to Mike Duffy, a senator facing criminal charges that may or may not involve the prime minister’s former chief of staff having improperly repaid the federal treasury for travel and living expenses that Duffy may or may not have improperly billed the taxpayer, in the amount of $90,000. It’s a gripping yarn and dozens of journalists are on the story, but it says something unflattering all round that what we know now about Canada’s immigrant-investor courtship of Beijing’s princelings is mainly due to the courage and persistence of a single reporter.
Ian Young, Vancouver correspondent for the South China Morning Post, has been almost alone in chasing down the immigrant investor scandal. It was Young who recently ferreted out the data demonstrating that Canada’s investor class immigrants, about 80 per cent of whom are Chinese millionaires, appear to have contributed less to the federal treasury over the past quarter of a century in tax on earnings than the bedraggled refugees Canada admitted over that period.
Nobody seems to even know where all these bigshot investors have gone. Surveys by the China Merchants Bank show that nearly a quarter of Mainland China’s millionaires had already emigrated by 2o13, but vacancy rates in Vancouver’s posh new condo districts are perhaps 30 per cent. The city doesn’t keep track, but University of British Columbia geography professor David Ley has been tracing the trend relationship between the rise in Vancouver residential property prices and the influx of immigrant investors over the years. The lines run in direct lockstep.
Last year, Macdonald Realty opened an office in Shanghai to directly market to Chinese buyers after finding that a third of its Vancouver house sales for the year had gone to buyers with “mainland Chinese names.” Ian Young reckons that, in dollar terms, near half of Vancouver’s detached housing market in 2014 probably went to Mainland Chinese buyers.
But the debate about these things has been so “suppressed,” to borrow Professor Ley’s term, that the subject barely came up during last year’s Vancouver civic elections. Given Vancouver’s first-place finish this week in StatsCan’s Unhappy City sweepstakes, it now seems awkward to mention that Vancouver Mayor Gregor Robertson, before he got into politics, was most famous for having co-founded the Happy Planet Fruit Juice Company. In any case, Robertson was handily re-elected last November.
Among the accomplishments that put Robertson back in the mayor’s chair was his “green demolition bylaw.” Vancouver’s weirdly overheated property market has caused vulgar palaces to pop up in all the neighbourhoods where the city’s grand old houses used to be. The bylaw requires the recycling of up to 90 per cent of the demolition material from the city’ s old “character homes.”
I suppose Vancouverites can be happy at least about that.
Terry Glavin is an author and journalist.
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