Bloomberg Calls Vancouver ‘The City That Had Too Much Money’

Known abroad primarily for its stunning Pacific Coast setting and athletic lifestyle, the city has since become one of the world’s largest sluices for questionable funds moving from Asia into Western economies. One academic terms the process “the Vancouver model”: a seamy mingling of clean and dirty cash in casinos, real estate, and luxury goods made possible by historic ties to China and by Canada’s lax record of fighting financial crime.

It’s a product of one of the largest financial flows of the 21st century: The money being frenetically shuffled by millions of wealthy Chinese into safe assets abroad, in defiance of their country’s capital controls. Since mid-2014, capital flight from China may have totaled as much as $800 billion, according to estimates from the Institute of International Finance.

In Vancouver, the tidal wave has wrought a dramatic economic, demographic, and physical transformation. Alberni Street, a formerly dowdy downtown thoroughfare, has in the past decade welcomed a two-level Prada boutique with a black marble facade, one of the largest Rolex showrooms in North America, and a 62-story tower with a five-star Shangri-La hotel. All have Mandarin-speaking staff. In May, Rolls-Royce chose Vancouver to unveil its first sport utility vehicle, which starts at more than $300,000, hosting a Champagne reception at its sleek new local dealership in an upmarket neighborhood about two miles south of Alberni. Six sold on the first day—bound, perhaps, for the “car condo,” a kind of luxe garage with customizable suites that’s being built in a majority-Asian suburb. The units start at more than C$800,000, and the first batch recently sold out.

Much of the money coming in has been legitimately earned, if sometimes extricated by gray-market means. But officials say that a substantial proportion is the proceeds of corruption or crime, including the illegal sale of opiates such as fentanyl. With public anger rising over astronomical housing prices and an economy distorted by wealthy outsiders, British Columbia’s left-leaning government—elected last year on a platform focused on calming the real estate market—is building a global laboratory for policies meant to restrain the arrival of Chinese money. The province is hiking taxes, toughening transparency rules, and tightening oversight of casinos and financial institutions.

Change will be difficult and fraught. Vancouver has been closely connected to Asia since the late 19th century, when the first Chinese laborers arrived to help build the trans-Canada railway, and the city is proud of its record of integrating immigrants. Also, beyond real estate, Vancouver’s economic base is shallow. It’s not the business capital of western Canada—that’s Calgary—and it has few major corporate headquarters or large-scale manufacturing operations. “Asian capital has kept this economy alive, end of story,” says Ron Shon, a Chinese-Canadian venture capitalist who arrived as a teenager in the late 1960s. “You can see it in every aspect of our lives.”

The money is arriving so fast, and in such volume, though, that standing by is no longer an option. Vancouver was perhaps the first major Western city to experience the full force of Chinese capital. Soon, it could be the first to learn what happens when you try to stop it.

– excerpt and image from ‘The City That Had Too Much Money’, Matthew Campbell & Natalie Obiko Pearson, Bloomberg, 20 Oct 2018