China has launched a global crackdown on its super-rich to collect hundreds of billions of dollars in unpaid taxes dating back decades, seeking to narrow income and wealth inequality and close a deepening budget deficit.

Authorities have intensified their scrutiny of overseas capital gains and investments, with investigations extending in some instances as far back as 2000. The campaign comes as Beijing attempts to significantly expand its oversight of outbound capital flows.

According to foreign officials, Chinese bankers, and family office executives who spoke to the Financial Times, Chinese banks and other financial institutions have been instructed to review the overseas investments of wealthy Chinese nationals and check whether the resulting income has been declared to tax authorities in Beijing.

The efforts, which form part of sweeping tax reforms targeting the country’s wealthy elite and offshore trusts, focus on gains derived from the acquisition of assets such as real estate, equities, precious metals, and cryptocurrencies.

Numerous officials, bankers, and advisers confirmed the retrospective nature of the campaign, noting that inquiries cover periods reaching back more than 25 years in certain cases.

A banker in southern China said that in recent months, Chinese banks have increasingly coordinated with tax authorities to freeze the accounts of wealthy clients until officials are satisfied that taxes on capital gains from overseas assets, accounts, and trusts have been paid.

“In standard practice, these wealthy individuals immediately pay the penalties and taxes in cash to get their accounts unfrozen,” the banker said.

The timeframes examined in the tax audits appear to vary significantly. For instance, an executive at a Shenzhen-based family office said clients were asked to pay taxes on gains generated from overseas assets between 2017 and 2022. No explanation was provided as to why that specific period was targeted.

Victor Shih, a professor of Chinese political economy at the University of California, San Diego, said the motivation behind the new campaign was “clearly rooted in fiscal reasons.”

China’s fiscal revenues, where taxes plug a critical gap, have largely stagnated since the pandemic and contracted by 1.7% in 2025 to 21.6 trillion yuan, or $3.2 trillion. Total public revenue from land sales, once a primary source of state income, fell to 4.15 trillion yuan following a real estate market downturn, down from a peak of 8.7 trillion yuan in 2021.

Last month, China also enacted comprehensive tax rules governing assets transferred to offshore trusts. According to a joint statement by China’s Ministry of Finance and the State Taxation Administration, the regulation closed a legal loophole long utilized by wealthy individuals to protect their assets abroad.

Under the new rules, income generated from offshore trusts will be subject to a 20% tax across multiple stages.

A Singapore-based banker who manages overseas assets for wealthy Chinese nationals said the offshore trust tax “shocked” clients.

“There are people who established trusts for public assets, such as shares in listed companies. During periods when initial public offerings were very common, holding the right trust structure provided protection regarding income tax. This new decision has eliminated that advantage,” the banker said.

While experts suggest that some complex overseas structures may evade the new rules, many trust holders are expected to face a one-off tax liability. Reports indicate that some may be forced to sell assets to meet the payments.

Together with other tax reforms, the new policies will align China’s taxation system more closely with that of the US, where American taxpayers are generally taxed on their worldwide income.

Ye Yongqing, a Shanghai-based tax lawyer and partner at Anli Partners, said, “Regulatory bodies have steadily tightened oversight of cross-border capital flows, declarations of overseas income, and foreign exchange transactions. Consequently, the scope for wealthy Chinese to transfer assets abroad or structure their tax affairs through offshore vehicles has narrowed.”

Ye noted that Beijing has adopted a restrictive approach toward offshore trusts similar to US tax legislation, broadly rejecting attempts by taxpayers to use these vehicles to defer or entirely eliminate tax.

There are also indications that stricter tax collection from China’s wealthy has yielded results in recent years. Official data shows that personal income tax revenues rose 11.5% in 2025, driven by the impact of previous campaigns, including the taxation of Hong Kong stock transactions. This growth rate significantly outpaced the 0.8% expansion in overall tax revenues.

An executive at an immigration firm with offices in China and New York said authorities initially targeted wealthy Chinese trading US equities via Hong Kong or other overseas channels.

The executive said the inquiries are expected to expand next to individuals holding substantial financial assets in overseas bank accounts, particularly in Hong Kong, and ultimately to other forms of offshore wealth, including real estate.

Japan’s government is framing its accelerating military buildup not only as a means of national defense, but also as a pathway to greater prosperity, with its latest defense white paper asserting that arms production can stimulate economic growth.

The document, an annual assessment of alleged threats posed by neighboring countries China, Russia, and North Korea, calls on Japan—long constrained by post-war limits on military activity—to leverage technology, fund ventures, and incorporate a higher proportion of commercial components into weapons manufacturing.

According to a Defense Ministry presentation document, the white paper “emphasizes that defense investments benefit the overall economy and the lives of the public.” That message aligns with Prime Minister Sanae Takaichi’s policy of utilizing broader strategic public spending to drive economic growth.

This approach is reflected in the document’s anime-style cover image. Departing from the soldiers, weaponry, and military insignia featured in many previous editions, the cover depicts a smiling family set against a glowing futuristic cityscape. A Defense Ministry official said the design was intended to convey a “futuristic image.”

The explicit link drawn between defense and future prosperity coincides with the Takaichi administration’s drafting of a new national security strategy. Military analysts anticipate that the strategy will outline further spending increases designed primarily to deter China.

“China’s military activities and other actions are a matter of serious concern for Japan and the international community, representing the greatest strategic challenge facing Japan,” the white paper states.

Remarks by Takaichi in November indicating that Japan would act militarily in the event of a potential Chinese intervention in Taiwan drew a sharp reaction from Beijing. China termed the statement “extremely grave” and demanded its retraction.

Tokyo has assembled a financing package combining tax increases, spending reforms, and one-off revenues to fund Japan’s largest military buildup since World War II, raising defense-related spending to 2% of gross domestic product. However, Takaichi has yet to clearly articulate how additional military expansion will be funded without imposing further strain on already heavily burdened public finances.

The Takaichi government secured approval for a record 122.3 trillion yen budget for the fiscal year ending in March 2027. An additional 3.1 trillion yen package was later added to shield households and businesses from rising energy costs, underscoring the competing demands placed on public resources.

To date, the bulk of the new defense spending has been directed toward missiles capable of striking targets at distances exceeding 1,000 kilometers. A significant portion of future spending increases is expected to be allocated to uncrewed aerial vehicles and other uncrewed weapons systems of the type deployed extensively by Ukraine in its war with Russia.

The mid-year meeting of the Communist Party of China (CPC) Politburo has long served as a critical evaluation point for Beijing. The session provides the central government with an opportunity to review developments from the first half of the year and steer the country toward a more realistic economic course in the months ahead.

The latest statement from the top leadership signals cautious confidence. The release indicates that policymakers are favoring a stable, targeted approach over the broad-based stimulus measures that characterized previous years. As China manages its economic transition, the post-Covid era of aggressive spending has clearly drawn to a close. In its place, a strategic and structural approach has taken hold, prioritizing resilience and stability over short-term capital injections.

According to the outcomes of the Politburo meeting, the policy orientation will continue to target specific sectors. Financial support will be directed away from the property market and toward high-tech emerging industries such as artificial intelligence and semiconductors. In the real estate sector, the objective remains stabilizing market confidence and keeping debt risks under control.

Infrastructure investment is likewise being reshaped around the concept of “new infrastructure.” The focus is no longer solely on concrete and physical structures; smart power grids, information technology networks, and data infrastructure have taken precedence.

This approach signifies an investment in future competitiveness rather than simply pumping capital into the economy’s more stagnant sectors. Serving as a new driver of growth, digital infrastructure fulfills a dual purpose: supporting domestic demand in the short term while safeguarding technological competitiveness over the long term.

Finally, Beijing is signaling a more conciliatory posture in international trade. The Chinese leadership aims to establish a more balanced trade framework to mitigate concerns voiced by trade partners such as the European Union over what has been termed “China Shock 2.0.”

As the administration prepares for critical leadership changes next year, its primary focus will remain on stability across both economic and social spheres.

China continues to strike a balance between realistic growth targets and systemic restructuring, maintaining policy leeway to absorb potential external shocks. Beijing’s economic strategy reflects a pragmatic assessment of both domestic and international challenges.

Struggling with weak demand, the domestic economy is not yet in a position to anchor national growth independently. Expansion continues to rely heavily on a record trade surplus alongside the impressive export performance of high-tech and clean energy sectors. However, this reliance has drawn pushback from several trading partners.

To stimulate domestic economic activity and ease trade tensions, Beijing unveiled its first standalone five-year plan focused on consumption. Released in July by the National Development and Reform Commission and the Ministry of Commerce, the plan targets an increase in retail sales to 60 trillion yuan (approximately $8.9 trillion) by 2030. This represents an increase of roughly 20% compared to 2025 levels.

To improve profit margins for small businesses, regulatory authorities are tackling the issue of “involution”—described as excessive internal competition—by curbing platform monopolies and preventing destructive price wars. While these structural adjustments may take longer to yield results, they are viewed as a more sustainable and effective alternative to direct cash handouts.