In a move seen possibly as a response to offshore tax pressures, the founders of the mainland Chinese restaurant chain, HaiDiLao, listed in Hong Kong, have sold 259 million shares, cashing in 2.75 billion Hong Kong dollars. On September 11th, the stock price of HaiDiLao closed at 10.06 Hong Kong dollars, up 1.46%. Prior to this, the stock price had fallen for two consecutive trading days, especially on September 9th when it dropped 12.13%, ultimately closing down 9.14% at 10.34 Hong Kong dollars.
The direct catalyst for the stock price decline was the sudden reduction of shares by Zhang Yong’s wife, Shu Ping, on September 8th. Through a block trade of 259 million shares at a price of 10.62 Hong Kong dollars per share, approximately 2.75 billion Hong Kong dollars were cashed in, representing about 4.65% of the issued shares.
According to a statement from HaiDiLao released on the Hong Kong Stock Exchange, the sale was purely for the financial needs and arrangements of the controlling shareholder and is a matter of personal affairs unrelated to the group’s business, operations, financial conditions, and development prospects.
Media outlets such as “21st Century Business News” suggested on September 11th that the share reduction happened just after the semi-annual financial report was released and was a one-time bulk transaction. Regardless of the angle from which it is viewed, it does not align with a measured reduction in holdings but rather seems like a definite timed liquidation. It could be a personal asset adjustment, as many wealthy individuals have been reviewing their asset structures since the new offshore trust tax regulations were introduced in late July.
Analysts from Morgan Stanley, including Hildy Ling, expressed surprise in their report regarding the block reduction transaction. This is because HaiDiLao founder Zhang Yong had increased his shares in May at a price of 13.39 Hong Kong dollars per share, only for his wife Shu Ping to drastically reduce the holdings in September at a discount (10.62 Hong Kong dollars per share). Morgan Stanley emphasized in its research that “this reduction will suppress market sentiment in the short term.”
Media outlets like Bloomberg believe that this move, which took place after Beijing announced the formal taxation of offshore trusts established for citizens, closing long-standing tax loopholes for the wealthy, has sparked strong reactions in wealth management hubs like Hong Kong and Singapore.
The Chinese communist government imposes a 20% tax on the establishment, asset injection, operation, appreciation, distribution, and termination of offshore trusts. The official announcement clearly states that setting up assets in offshore trusts incurs a 20% individual income tax upon the establishment phase; any earnings generated during the duration, whether distributed or not, are subject to a 20% annual tax; and upon trust termination and liquidation, another 20% tax is levied on the profits.
Moreover, the anti-tax evasion provisions from the Chinese government are clearer – profit conveyed by non-resident trusts to residents is considered distribution; individuals with foreign nationality but with primary economic interests from domestic sources can still be deemed as resident individuals. Public opinion believes that this provision is tailor-made for certain immigrant entrepreneurs. The founders of HaiDiLao, Zhang Yong and his wife, are Singaporean nationals.
This measure has caused panic among the wealthy segments in China. They must declare and pay taxes by October 22, otherwise a daily late fee of 0.05% will be added. Previous reports from mainland Chinese media indicated that the offshore trust of HaiDiLao’s Zhang Yong and his wife might require tax payments amounting to tens of billions of Chinese yuan; the Zong Qinghou family of Hangzhou Wahaha Group needs to pay around 2 to 2.5 billion Chinese yuan in taxes, depending on the original tax payment certificates, tax resident status, and fund ownership determinations; and the assets that SOHO China founder Pan Shiyi and his wife Zhang Xin transferred overseas through offshore trusts over twenty years ago, previously thought to be worry-free, could entail a total tax liability of up to 5 to 7 billion Chinese yuan.
Financial experts calculated that in its 8 years since going public, HaiDiLao has distributed approximately 14 billion yuan in dividends, with Zhang Yong and his wife holding about 50% of the shares. The offshore trust account received around 7 billion yuan, which, when multiplied by 20%, equals 1.4 billion yuan. The recent stock reduction by Zhang Yong and his wife of HaiDiLao, cashing out 2.75 billion Hong Kong dollars (approximately 2.5 billion yuan), also requires an additional 20% payment, amounting to 500 million yuan. The total tax burden could exceed 2 billion yuan.
Barclays, in its latest research report, estimated that the scale of Hong Kong offshore trusts and insurance assets related to mainland Chinese investors is around 500 billion US dollars. Against the backdrop of the Chinese government seeking new sources of fiscal revenue, the anticipated impact on the financial market could be profound, with many investors likely needing to sell off assets to pay taxes.
An article from the Financial Times on August 5th suggests that the focus of the Chinese government’s current tax collection actions is on profits gained from overseas assets. Several officials, bankers, and advisors have confirmed retrospective situations, with some cases going as far back as 2000.
China’s fiscal revenue heavily relies on taxation, and revenue from land sales that used to be a core financial source for local governments has plummeted from a peak of 8.7 trillion yuan in 2021 to 4.15 trillion yuan in 2025. Since the outbreak of the real estate crisis in 2021, the market has remained sluggish, posing challenges to the finances of various local governments. Victor Shih, a professor at the University of California, San Diego, bluntly stated that Beijing’s expanded tax collection motives are “clearly driven by financial considerations.”
An industry insider in China’s banking sector revealed that financial institutions have received instructions to fully cooperate with tax authorities in auditing the overseas investments of the wealthy. Upon discovering any inaccurate declarations, their accounts will be frozen until the individuals fully pay the overseas capital gains tax and penalties in cash before the freeze is lifted.