More Chinese clients switch to offshore banking for safety net

INVESTMENT protection is one of the main reasons behind the ever-widening popularity of offshore banking in Hong Kong.

Offshore banking, with its connections to such remote and exotic regions as the Cayman Islands, Switzerland and the Seychelles, was for many years widely regarded as the sole province of international business tycoons.

These people needed to protect their investments from income and other taxes levied by the countries in which they did business.

Offshore banking also developed as a convenience for corporations that did business in many countries. These ranged in size and stature from trading companies to billion-dollar multinational operations - but they all needed easy access to banking facilities around the world regularly.

Also, in the past 10 years, retail offshore banking had been largely practised in Hong Kong by expatriates, who needed to retain old accounts, or open new ones, to manage established investments, such as houses and shares.

However, the average retail offshore banking client in Hong Kong is now more likely to be Chinese, the banking and investment community says. And, while high-net-worth individuals and families continue to be big users, more middle-class people are using offshore banking.

Many have been pushed towards it as a means to keep up with Hong Kong's rising housing prices - middle-class flats are now commanding at least $5 million.