Beijing Cracks Down on Offshore Assets in Bid to Boost Domestic Investment

China's government is facing a challenge in getting its citizens to invest in domestic assets rather than foreign ones. The Shanghai Composite Share Index has risen by 2.4% since September 2025, while the Standard & Poor Index has increased by 34% over the same period.

The interest rate on a one-year yuan deposit is 0.95%, compared to 4% for a one-year U.S. dollar deposit in Citibank. This disparity has led Chinese investors to favor U.S. assets over mainland ones.

However, Beijing is trying to encourage domestic investment by increasing the total that can be invested through the Qualified Domestic Institutional Investor (QDII) scheme from $177 billion to a record $183 billion. The U.S. is the top destination for China's QDII funds, accounting for nearly half of the business.

The government has also launched a crackdown on offshore assets, demanding 20% tax on gains from purchases of real estate, equities, precious metals, and cryptocurrencies going back as far as 2000. This move is aimed at bringing in an estimated $809 billion in capital that has left China over the past year.

According to KPMG, more than half of China's super-rich have set up offshore trusts to manage their wealth and protect it from taxes. The new rules will subject the income generated by these trusts to a 20% tax at multiple stages.