Canada closed a controversial immigration program popular among rich Chinese that allowed wealthy individuals to effectively buy permanent residency.
The cancellation of the Immigrant Investor Program, announced Wednesday, is the latest in a series of moves by Ottawa that have been perceived in parts of China and even Canada as limiting the inflow of Chinese people and investment into the country.
The Canadian government said the immigration program “significantly undervalued Canadian” permanent residency. Immigrants who use this program have paid less tax and earned less in wages in Canada than those who enter the country in other ways, the government said.
The government said it would replace the program with a new Immigrant Investor Venture Capital Fund, which will require immigrants to invest money, rather than just loan it. The shift comes as part of a major years’ long overhaul of the Canadian immigration system aimed at choosing newcomers who Ottawa believes are a better fit for its economy and society.
New rules place greater emphasis on an immigrant’s fluency in the nation’s two official languages and weigh how closely applicants’ qualifications match Canadian credentials. The system also gauges so-called adaptability: factors such as time spent previously in Canada.
The now-shuttered program allowed permanent residency for those who committed 800,000 Canadian dollars (US$726,720) to a five-year zero-interest loan to one of the country’s provinces.
At the end of June 2013, there was a backlog of 81,963 applications to the investor immigrant program, of which 70% filed forms at the Canadian consulate in Hong Kong, the main hub for Chinese applicants. Some of those applicants have been waiting over five years for their approval.
Politicians from the opposition New Democratic Party have accused Prime Minister Stephen Harper’s Conservative Party of tilting policy back to benefit European nationalities such as the British and French, whose immigrants once predominated. The government has scoffed at the suggestion, saying that Asians and Middle Easterners still make up the majority of newcomers.
Canada lets in more new immigrants per capita than any of the Group of Seven advanced economies. While Chinese immigration has tailed off since its peak in 2005, it still made up around 11.5% of all immigrants to Canada in 2011, according to government numbers.
Some Canadian businesses and bankers worry that Chinese investment has been affected by a December 2012 change in investment regulation that effectively put a halt to large acquisitions of Canadian oil-sands developments by state-owned enterprises. Those changes came in the wake of the furor that surrounded Chinese oil giant’s Cnooc Ltd.’s $15.1 billion bid for Nexen Inc. that year.
Last year, Chinese buyers spent just $439 million in Canada, barely 2% of their investment in 2012, according to Dealogic. Chinese investment in the U.S., meanwhile, almost doubled to $12.2 billion over the period, and increased by 13% to $10.2 billion in Australia. Chinese investors have continued to pour money into Canada’s real-estate markets, pushing up prices in cities such as Toronto and Vancouver.
The very vocal community of lawyers and real-estate agents whose clients used Canada’s investor immigration program said other countries that have rapidly rolled out their own plans would benefit. “Canada is burning the investor immigration program to the ground,” said Richard Kurland, an immigration lawyer in Vancouver. “What happens now? This is a bonanza for other countries.”
Until recently, Canada was the top choice for Chinese investor-immigrants because of its relaxed immigration policies and generous publicly funded health and education systems.
Australia could stand to gain from Canada’s decision. The country unveiled in 2012 its Significant Investor visa program to allow immigrants a residency visa if they invested 5 million Australian dollars (US$4.5 million) into a local business or approved managed funds. So far, the program attracted 601 applicants, of which 91% were Chinese nationals.
In recent years, countries starved of investment capital have been opening their doors to wealthy immigrants. The nations range from tiny Caribbean nations including Antigua & Barbuda to European countries and offer residency visas and, in some cases, full citizenship, in return for investment. Cash-strapped southern European economies, including Portugal, Spain, Greece and Cyprus, allow investors a residency permit for those who purchase as little as EUR250,000 ($340,950) worth of real estate.