Chinese tax authorities have begun levying a 20 percent personal income tax on proceeds from overseas insurance policies in Hong Kong held by Chinese residents in Beijing and Hangzhou in recent days, following the launch of new tax rules on Chinese citizens’ overseas wealth. Analysts told The Epoch Times that the Chinese regime is targeting overseas assets to deal with its financial difficulties, leading to an exodus of affluent Chinese.
Beijing and Hangzhou authorities have already imposed a 20 percent tax on dividend and interest income from Hong Kong insurance policies held by Chinese citizens, according to a report by major Chinese state-censored financial media outlet Caixin on Aug. 5.
This marks the funds held by mainland residents in Hong Kong insurance accounts being brought within the scope of scrutiny by mainland tax authorities. A unified nationwide procedure has not yet been established, according to the report.
This follows the new tax rules issued on July 24 by the Chinese regime’s Ministry of Finance, which imposes a 20 percent personal income tax annually on overseas investments and offshore asset income held by Chinese residents.
Those Chinese who become foreign citizens or overseas permanent residents while retaining their main economic interests in mainland China may still be treated as Chinese tax residents, according to Chinese finance ministry and state tax administration authorities.
The new regulations also require existing trusts to pay previously unpaid taxes within 90 days. Otherwise, the tax authorities will recover the unpaid or underpaid tax and the overdue payment fine, and impose a penalty.
The Chinese regime uses the Common Reporting Standard system to pursue tax collection globally.
Chinese authorities are also scrutinizing Chinese citizens’ past overseas wealth, in some cases going back to the year 2000, according to a Financial Times report.
Xu Zhen, a senior professional in China’s capital market, confirmed to The Epoch Times that the Chinese authorities are conducting retrospective tax collection on Chinese citizens’ overseas wealth dating back 25 years.
“The 25-year retrospective tax collection will accelerate the flight of wealth and the physical emigration of the wealthy,” he said. “Entrepreneurs and startup founders represent a nation’s most valuable asset for economic development. As capital and the wealthy exit the country, China’s economy will further lose its growth momentum and innovative capacity, widening the gap between China and the United States in terms of economic and technological competitiveness significantly.”
The move is not merely about checking taxes; rather, it aims to make offshore assets transparent, traceable, and subject to taxation, Sun Kuo-hsiang, a professor of international affairs and business at Nanhua University in Taiwan, said of the new tax rules on overseas wealth.
“For China’s wealthy and powerful families, the biggest shock is the shattering of the sense of security they once derived from using Hong Kong insurance policies, offshore trusts, overseas brokerage accounts, and family offices to ring-fence their assets,” Sun said.
“Asset allocation strategies will be forced to shift toward compliant reporting, the payment of back taxes, internal restructuring, and even speeding up emigration of family members,” Sun said of the impact.
Tightened Exit Control
Meanwhile, Chinese authorities recently issued a new version of Regulations on Exit and Entry Administration, tightening control of Chinese people leaving the country, including those who have already become citizens of other countries. The new regulations are set to take effect on Sept. 15.
Under these regulations, county-level agencies and governments are authorized to independently make decisions restricting the exit of residents from the country and to exercise comprehensive oversight over exit-entry intermediary agencies.
It’s also become harder and harder for Chinese citizens to get passports; some have even been required to turn in their passports.
A security guard directs passengers at Beijing International Airport on July 6, 2025. Wang Zhao/AFP via Getty Images
The new regulations regarding entry and exit have led to a degree of decentralization, placing the control over cross-border movement in the hands of low-level local governments, which will lead to more corruption, Xu said.
“If wealthy individuals wish to leave the country, they may face demands to pay higher taxes or offer greater ‘tributes’ to local officials and the specific personnel handling their cases,” he said.
“Also, a controlling shareholder might be required to serve as a hostage or bargaining chip to secure exit permission for the rest of the family—scenarios like these are entirely possible.”
If wealthy Chinese wish to leave the country but are unable to do so due to the exit control, they often turn to strategies that involve separation and de-risking, Sun said, “such as moving capital, residency status, family members, or corporate structures out of the country first.”
“These measures include paying back taxes to secure safety, diversifying assets, leveraging the overseas status of family members, and restructuring trusts or corporate equity; however, such moves carry a higher risk associated with the outflow of ‘gray’ capital,” he said.
As for the “Red elite”—ruling Chinese Communist Party (CCP) elite families—they are exempt from such restrictions, Sun said, “as selective enforcement is an inherent feature of the CCP’s system, though the specific circumstances of individual families are difficult to verify publicly.”
The real consequence is that private capital and entrepreneurial spirit will be drained away, Sun said. “China will increasingly resemble a closed state characterized by high control, low mobility, and low innovation—a ‘new North Korea.’”
Regime’s Financial Difficulties
The Chinese economy has remained sluggish in recent years, with the regime setting the lowest Gross Domestic Product rate target for this year in decades.
Meanwhile, China’s mounting government debt reached 96 trillion yuan ($13.9 trillion) as of the end of 2025, according to public information.
On July 22, the Chinese Ministry of Finance released data on fiscal revenue for the first half of the year, revealing that the fiscal self-sufficiency rate of every province was below 100 percent, meaning expenditures exceeded revenues in all provinces. A spokesperson for the ministry said at a news conference on the same day that it’s not unusual for the local fiscal self-sufficiency rate to fall below 100 percent, adding that the central government has increased fund transfers to local governments, enabling them to achieve a balance between revenue and expenditure.
A woman shops for vegetables at a supermarket in Beijing on May 11, 2026. Wang Zhao/AFP via Getty Images
Lengyan Caijing, a veteran independent finance commentator, told The Epoch Times that the CCP’s tax enforcement expanding to overseas wealth is primarily due to the collapse of China’s public finances. “The government is scrambling to scrape together funds, and wealthy individuals lacking powerful political backing may well face ‘being harvested’ [in asset seizure]. In contrast, the families of the CCP’s top elite likely completed their overseas asset arrangements long ago and are unlikely to be significantly affected by the new regulations.”
When the CCP is “harvesting” from the wealthy and the powerful, the money typically flows first into plugging the financial holes—covering government debt, the regime’s stability maintenance, state-owned enterprises, and local government deficits—rather than being distributed to the general public in a transparent or institutionalized manner, Sun said. “At best, what ordinary people gain from it is a fleeting sense of fairness through propaganda, rather than sustainable income, social security, or the protection of property rights.”
Taxing the wealthy might seem from the CCP’s perspective like a way to improve its fiscal health without stoking public resentment against the government, Xu said. “However, this is merely wishful thinking. In reality, against the backdrop of economic recession and depleted coffers, forcing the wealthy to keep paying taxes does little to affect their quality of life, yet it accelerates their flight abroad.”
“Meanwhile, ordinary citizens face the existential pressures of unemployment and falling incomes, enduring far greater hardship. Throughout history and across the globe, the collapse of authoritarian regimes has typically begun with a fiscal crisis and culminated in a social crisis,” he said.
Tang Bing, Luo Ya, and Reuters contributed to this report.
Correction: A previous version of this article misstated when the Chinese Ministry of Finance issued the new tax rules that imposed a 20 percent personal income tax on Chinese residents’ overseas investments and offshore asset income. The Epoch Times regrets the error.
