Economy/Resources

As China’s economic growth slows and fiscal pressures mount, authorities are reportedly expanding tax enforcement to offshore trusts, which have long been used by wealthy Chinese individuals to protect assets, manage inheritance, and mitigate financial and political risks.

Sources inside China said that tax authorities in Shanghai, Jiangsu, Shenzhen, and other jurisdictions have begun requiring owners of offshore trusts to disclose detailed financial information, including dividend income and capital gains from share sales. Shanghai reportedly began collecting information on income earned during the previous two years in early 2025. In one reported case, a local tax bureau imposed a 20 percent tax on investment income along with additional penalties. The campaign targets trusts established in offshore jurisdictions such as the Cayman Islands, the British Virgin Islands, the Cook Islands, and Hong Kong.

A 2023 study found that the Chinese business elites’ use of offshore family trusts accelerated after 2018, with founders of more than 60 overseas-listed Chinese companies establishing such structures. According to the China Business Journal, in 2018 alone at least 15 Chinese entrepreneurs listed in Hong Kong established offshore trusts, transferring an estimated US$28.5 billion in assets overseas. They included Alibaba founder Jack Ma, PDD Holdings founder Colin Huang, Xiaomi founder Lei Jun, and JD.com founder Richard Liu (Liu Qiangdong).

Analysts believe most wealthy individuals are unlikely to conceal offshore assets, as their businesses, families, and core assets remain closely tied to China, making the legal and political consequences of noncompliance potentially severe. Instead, many are expected to adopt a strategy of public compliance while quietly restructuring their holdings, redesigning family trust arrangements, and accelerating the overseas relocation of assets—and, in some cases, their personal residency.

Source: Epoch Times, June 5, 2026
https://www.epochtimes.com/gb/26/6/4/n14782255.htm

Public criticism of China’s economy by prominent Chinese scholars is relatively uncommon. However, at the 122nd China Macroeconomy Forum (CMF) on July 11, Li Daokui (李稻葵), dean of Tsinghua University’s Institute for Chinese Economic Practice and Thinking, acknowledged that China’s economy has remained “too cold” for the past three years and estimated the country’s broad unemployment rate at 10.2 percent.

Li argued that China’s greatest economic challenge is not a K-shaped recovery or widening economic polarization, but a prolonged, broad-based slowdown affecting the entire economy. He warned that strong performance in a few sectors cannot compensate for weakness across the broader economic base.

Li highlighted two indicators that he believes require urgent attention: broad unemployment and fixed-asset investment. His research team recalculated China’s unemployment rate by including discouraged workers who have stopped actively seeking jobs but still want employment. Based on this methodology, he estimated the broad unemployment rate at 10.2 percent, including approximately 24 million long-term discouraged workers, of whom about 13 million are between the ages of 16 and 24. He warned that persistently high youth unemployment poses a risk to social stability.

Li also pointed to the continued contraction in fixed-asset investment, noting that investment declined throughout 2025 and fell another 4.1 percent year-on-year during the first five months of 2026—an unusually prolonged downturn. He attributed the slowdown to the exhaustion of China’s traditional growth drivers, arguing that neither the property sector nor large-scale infrastructure investment is providing the economic momentum that fueled growth over the past two decades.

Source: United Daily News (Taiwan), July 14, 2026
https://money.udn.com/money/story/5603/9626860

Chinese economist Li Daokui said China’s biggest macroeconomic problem is not a “K-shaped” divergence between strong and weak sectors, but an overall cooling that has persisted for three years. Speaking at the 122nd China Macroeconomy Forum on July 11, the Tsinghua University institute director warned that focusing only on divergence gives false comfort, since the “upper line” of a K-shape cannot lift the whole economy.

Li highlighted two concerning indicators. First, his team recalculated a broader unemployment rate by including discouraged workers who had stopped being counted as part of the labor force, arriving at a rate of 10.2%. He estimated about 24 million people have been long-term discouraged jobseekers, including 13 million aged 16 to 24, posing risks to social stability.

Second, fixed-asset investment turned negative in 2025 and fell a further 4.1% year-on-year in the first five months of 2026, an unusually severe and prolonged decline.

Li attributed the slowdown to the disappearance of old growth engines—large-scale infrastructure and real estate investment—without new ones emerging. While households have absorbed much of the property downturn’s impact, he said the bigger problem lies with local governments and their debt. Households are reluctant to borrow for consumption, businesses are reluctant to invest, and funds flowing to local governments are largely being used to roll over old debt rather than fund new activity.

Li proposed that the central government significantly increase bond issuance beyond this year’s planned roughly 12 trillion yuan (approximately US$1.68 trillion), directing new funds toward stabilizing real estate, human capital investment, livelihood spending, and regional consumption subsidies to help local governments drive economic transformation.

Source: Central News Agency (Taiwan), July 14, 2026
https://www.cna.com.tw/news/acn/202607140130.aspx

Chinese passenger vehicle sales in Europe surpassed those of Japanese automakers for the first time in May, according to the latest data from the European Automobile Manufacturers’ Association (ACEA). The figures show that five Chinese automakers sold 138,400 vehicles across 31 European countries, a 65 percent year-on-year increase, while six Japanese automakers sold 130,400 vehicles, down 3 percent from a year earlier.

According to Nikkei, Japanese automakers continue to enjoy a strong reputation for fuel-efficient hybrid vehicles but have struggled to benefit from Europe’s electric vehicle (EV) incentive policies due to their relatively limited EV product lineups. The report cited Beatrix Keim, Managing Director of Germany’s Center of Automotive Research, as saying that European consumers generally do not consider Japanese brands when purchasing electric vehicles.

The report said Japanese automakers’ presence in the European market continues to diminish, while Chinese brands are steadily expanding their market share and influence, supported by strong growth in demand for electric vehicles.

Source: Xinhua, July 3, 2026
https://www.news.cn/world/20260703/5a0d25bcce094228abf73f3acc5eb108/c.html