French media RFI on the 29th, quoting a Bloomberg article, announced an article introducing that Chinese authorities are advancing "strong regulations," such as imposing taxes on Chinese citizens' overseas asset management. For Chinese citizens living in mainland China, directly buying and selling securities overseas was illegal, except for a few approved methods, but until now, the government had been "turning a blind eye" to various loopholes, so many people believed it was tacitly approved as policy.

One of the major changes is that many people who had traded stocks overseas were suddenly asked to pay taxes on their investment profits. Investment channels have also been closed. Furthermore, three popular securities companies were told they could be subject to fines of over 330 million dollars (approximately 53 billion yen). There was also an explanation that supervision of banks would be strengthened.

Due to the shift in policy by Chinese authorities, the Hong Kong stock market, which had benefited from capital inflows from mainland China, as well as law firms, financial advisors, and investment funds that assist Chinese citizens with overseas asset management, are also being affected.

Reuters also pointed out that since Chinese authorities began cracking down on cross-border investments, foreign and Chinese banks in Hong Kong are acting quickly to comply with the authorities' new requirements. For example, HSBC, Hong Kong's largest bank, now requires mainland Chinese customers applying to open investment accounts to sign documents confirming that their funds originate from outside mainland China.

The Bloomberg article further pointed out that Chinese citizens have for years been playing a "cat and mouse" game with regulators and capital outflows. According to China's official regulations, the annual limit for individuals to legally exchange and transfer funds overseas is 50,000 dollars (approximately 8 million yen), but many people have moved more funds abroad through methods such as underground banks, cryptocurrency, and even fictitious imports. Chinese authorities have tightened capital outflows in recent years.

Furthermore, it is said that some people underwent tax investigations even before the authorities' "tightening policy promotion" became clear. The targets were often wealthy individuals with assets exceeding 30 million dollars (approximately 4.8 billion yen). Although they were of Chinese origin, the targets were often those who had acquired foreign nationality and then returned to reside in China long-term. Some of these individuals had managed their assets using offshore trust structures. According to informed sources, such individuals could be charged up to 20% investment income tax, and would also need to pay arrears and fines. However, the final payment amount might be determined through "negotiation" with the authorities.

This "rectification action" is considered the toughest in recent years. According to Bloomberg, many government departments jointly announced measures and agreed to crack down on illegal overseas investment services for mainland Chinese investors. Regulators also warned that banks would be subject to stricter scrutiny, and institutions providing account services to cross-border investors must strengthen compliance management. Hong Kong's regulatory authorities subsequently announced that they would strengthen supervision when mainland residents open accounts in Hong Kong, emphasizing the risk of money laundering if left unchecked.

Behind the related moves by Chinese authorities, it is said that China's local government finances are rapidly deteriorating. In other words, they are forced to seek new tax revenue sources. Some investors have voluntarily begun to withdraw from overseas markets to avoid greater supervision and tax risks in the future. It is likely to become even more difficult for mainland Chinese residents to invest in overseas markets, and it is inevitable that account opening, currency exchange, fund transfers, and declaration of overseas assets will face stricter supervision. (Translated and edited by Kisaragi Hayato)