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Themis Qi

For decades, Hong Kong has been a magnet for the rich.
From wealthy Chinese setting up family trusts to millionaires migrating from across Southeast Asia, all of them have been sucked in by the city’s promise of free capital flows, a trustworthy legal system and extensive financial expertise.
It is a winning combination that helped Hong Kong leapfrog Switzerland as the world’s biggest cross-border wealth hub last year, as the city rode a wave of blockbuster listings by Chinese technology companies.
But some worry this model could now come under threat. Over the past few months, Beijing has launched a slew of measures to tighten controls over cross-border financial flows, seeking to prevent tax avoidance and capital flight.
Major brokerages have been punished for helping mainland investors illicitly buy overseas stocks, while banks have tightened checks for mainland customers applying to set up Hong Kong accounts.
Perhaps the most significant news came in late July, when Beijing announced that offshore trusts would now be subject to China’s personal income tax – closing a loophole that had allowed wealthy Chinese families to shield massive amounts of income from taxation.
In Hong Kong, some fear the new rules could disrupt – or even divert – capital flows into the city’s vast wealth management industry. But analysts said the city could benefit over the long term.
“In the short run, the new tax rules may push some mainland investors to adopt a wait-and-see approach,” said Tian Xuan, dean of Peking University’s Guanghua School of Management.
However, “Hong Kong’s future competitiveness lies in compliance capabilities and the depth of its professional services, rather than simply the tax haven effect”.
Hong Kong’s Private Wealth Management Association (PWMA) – which counts 44 financial institutions in Hong Kong as full members – said Beijing’s new offshore trust tax rules provided “regulatory clarity and certainty for global wealth management” and that the city’s unique role as a “super-value adding connector” for global capital remained unchanged.
This move towards compliance will enhance the long-term credibility of Hong Kong’s trust industry
Tian Xuan, Peking University
A hub for Chinese wealth
In May, Hong Kong received a boost when a report by Boston Consulting Group (BCG) found the city had surpassed Switzerland last year to become the world’s largest centre for cross-border wealth.
The amount of cross-border wealth parked in Hong Kong grew by more than 10 per cent to US$2.95 trillion last year, driven by an initial public offering (IPO) bonanza and an influx of capital from mainland China, according to the report.
Hong Kong’s success was built on “cementing its role as China’s gateway to global markets”, with “mainland flows representing over 60 per cent of assets under management” in the city, BCG said.
But that same concentration also “ties its trajectory tightly to economic and regulatory developments on the mainland”, the report cautioned.
As of 2025, Hong Kong was home to 76 billionaires with combined wealth of US$328 billion, while mainland China housed 470 with a combined worth of some US$1.77 trillion, according to a report by UBS in December.
What’s more, the city’s wealth management industry is likely to benefit as an entire generation of Chinese entrepreneurs ages and prepares to transfer their wealth to their younger relatives.
Over the next 15 years, more than US$300 billion of wealth in mainland China and Hong Kong will be handed over to the next generation, according to UBS.




Behind Beijing’s clampdown
But the new tax rules, announced by China’s Ministry of Finance last month, could complicate that process.
The policy – which took effect immediately – will levy a 20 per cent tax on the gains from offshore trusts with mainland Chinese beneficiaries or whose underlying assets are from the mainland.
The levy will apply to each major part of a trust’s lifespan, from set-up to termination, as well as the distribution of any income. It will also affect any gains dating back to as early as January 1, 2023.
To encourage voluntary reporting, Beijing offered a 90-day grace period for individuals who put their domestic assets – ranging from corporate equities to properties – into offshore trusts between 2023 and 2025 to declare them.
The rules raised concerns in Hong Kong, which has long been a destination of choice for affluent – and often high-profile – Chinese investors to set up offshore trusts, drawn by its low tax rate and strong privacy protections.
The issue became a hot topic in China recently, when children of the late Zong Qinghou – the billionaire founder of drinks company Wahaha Group – launched a legal battle for control over offshore trusts containing assets worth about US$2 billion.
For Beijing, such offshore trusts are a serious issue, as they have allowed the country’s wealthiest families to avoid paying tax on vast amounts of assets.
With Chinese government revenues under pressure amid a prolonged property market downturn, Beijing urgently needs to raise more money from taxes – and clamping down on tax avoidance is a key part of that effort.
Last year, Chinese authorities collected 1.62 trillion yuan (US$240 billion) of income-tax revenues – a steep 11.5 per cent increase over 2024 – as officials stepped up enforcement and closed tax loopholes.
The new rules on offshore trusts are the latest step in that drive. “Not only existing loopholes in tax administration will be plugged, but also a comprehensive cross-border personal income tax system will be established,” lawyers at multinational law firm King & Wood said in a report released on July 26.
For China’s billionaires, the campaign could be painful. As the report noted, a significant proportion of high-net-worth individuals’ overseas income is linked to offshore trusts.


What the rules mean for Hong Kong
The offshore trust tax marks a sharp escalation in China’s tax clampdown, but analysts stressed that the policy was in line with international practices.
“[It] will only eliminate non-compliant ‘grey-area’ practices, without undermining Hong Kong’s status as a global wealth centre,” said Tian of Peking University.
“Indeed, this move towards compliance will enhance the long-term credibility of Hong Kong’s trust industry.”
China is far from alone in fighting tax avoidance. In 2021, members of the G20 agreed to introduce a global corporate minimum tax rate of 15 per cent as part of an effort to prevent large companies from shifting profits to low-tax jurisdictions.
Key Chinese policies such as the country’s tax residency rules – which define anyone living in China for more than 183 days a year as tax resident – are closely modelled on overseas systems such as the US Internal Revenue Service.
To prosper under the new regime, Hong Kong needs to proactively drive the transition of the local offshore trust business towards greater compliance and allay mainland clients’ compliance concerns, according to Tian, who also serves as a Chinese government adviser and a deputy to the National People’s Congress.
Meanwhile, the city should further optimise its tax rules on share-based incentive schemes and trust isolation services to reduce cross-border tax costs for executives at artificial intelligence (AI) firms, Tian added.
That would help attract start-ups to set up related funds in Hong Kong, allowing the city to continue riding China’s tech boom.


Tapping China’s new tech elite
Hong Kong’s ability to serve China’s growing class of billionaire tech entrepreneurs will be key for the future of the city’s wealth management industry, analysts said.
Since early 2025, when the emergence of AI start-up DeepSeek reignited global investor interest in the Chinese tech sector, more than 200 companies have gone public in Hong Kong, raising nearly HK$500 billion between them, according to data from Hong Kong Exchanges and Clearing.
The wave of blockbuster listings is being driven primarily by mainland start-ups, which are increasingly choosing to go public in Hong Kong rather than Western markets such as New York amid rising US-China geopolitical frictions.
These IPOs, in turn, are minting an entire new generation of super-rich tech founders, who have their own asset-allocation needs.
For example, Liu Debing, chairman of Chinese AI firm Knowledge Atlas Technology – also known as Zhipu AI – saw his net worth skyrocket after his firm’s Hong Kong IPO at the start of the year.
Liu’s wealth swelled from about US$1 billion in mid-January to US$16.2 billion as of early August, after Zhipu AI’s stock price rose more than sixfold, data from Hurun Group and Forbes showed.
Zhu Yiming, chairman of Chinese chipmakers ChangXin Memory Technologies (CXMT) and GigaDevice Semiconductor, has also seen his net worth inflate from US$2 billion in mid-January to US$15.4 billion as of early August.
As cross-border tax reporting becomes inevitable, compliance might help Hong Kong gain more support from Beijing
Liu Jing, Cheung Kong Graduate School of Business
Hong Kong is well-placed to continue benefiting from the Chinese AI boom – bringing more talent and capital to the city – even as Beijing presses ahead with tighter offshore tax rules, according to Liu Jing, director of the investment research department at the Cheung Kong Graduate School of Business.
“As cross-border tax reporting has become inevitable, compliance might help Hong Kong gain more support from Beijing,” Liu said.
Hong Kong’s proximity to the mainland should help it maintain its competitiveness as an offshore wealth management hub for affluent Chinese investors, he added. After all, rival hubs such as Singapore will also need to deal with the stricter tax rules.
If it can do so, the rewards will be lucrative. With optimism rising regarding China’s ability to overcome US tech sanctions, Chinese AI start-ups have surged in value this year, propelling at least 20 domestic entrepreneurs onto the Hurun Global Rich List 2026.
Though US tech billionaires still dominate the list, Hurun Group’s CEO and co-founder, Sinclair Lyu, said the wave of AI-driven wealth creation had just begun, and China was primed to become a major driver of it.
“With the exciting Hong Kong IPO market and China’s reserves of young talent, we would definitely see more Chinese AI entrepreneurs stand at the top of the future global billionaire rankings,” Lyu said.




Deepening central support
Meanwhile, Beijing is backing Hong Kong to strengthen its role as an international asset and wealth management centre, with a related target included in China’s latest five-year plan.
Wu Qing, chairman of the China Securities Regulatory Commission (CSRC), reaffirmed that support in early August.
“Hong Kong has become the world’s largest cross-border wealth management centre,” Wu said at an event to mark the launch of China’s first offshore government bond futures in the city.
“We will deepen cooperation with Hong Kong counterparts across the board – spanning markets, institutions and products – and spare no effort in injecting new vitality and momentum into the development of the capital market.”
Financial institutions are also expanding their operations in Hong Kong.
HSBC, the city’s top lender, said in May that it would continue to expand the front desk of its wealth management team, with a goal of becoming Asia’s largest wealth manager.
Last month, Sun Life joined the race by launching an integrated wealth management platform to meet rising cross-border demand from high-net-worth individuals.
The PWMA – Hong Kong’s wealth management association – said the enhanced cross-border policies, coupled with accelerating wealth creation driven by the AI boom, would “inject fresh energy and momentum into cross-boundary wealth management, reinforcing Hong Kong’s position as a leading global wealth management hub”.


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For decades, Hong Kong has prospered by managing the wealth of Asia’s elite. Will that change as China introduces tougher offshore tax policies?


.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}For decades, Hong Kong has prospered by managing the wealth of Asia’s elite. Will that change as China introduces tougher offshore tax policies?

For decades, Hong Kong has prospered by managing the wealth of Asia’s elite. Will that change as China introduces tougher offshore tax policies?