China’s Tax Clampdown Raises Fears of Founder Share Disposals
Haidilao International Holding Ltd.’s sudden slump after its co-founder sold about $350 million worth of shares is putting the spotlight on other stocks that may be vulnerable to similar selling.
China's recent tax crackdown on offshore trusts, imposed in late July, has triggered concerns about founder share disposals among vulnerable stocks, according to recent reports. Haidilao International Holding's sudden plunge following its co-founder's share sale of around US$350 million has drawn attention to other potentially affected companies, including Li Ning, Xiaomi, and Sunac China Holdings.
The tax law grants a 90-day grace period to settle tax obligations without penalties, prompting business owners to settle liabilities sooner. This shift could expose more Hong Kong-listed companies, which often have founder-controlled stakes through offshore trusts, to increased volatility. Several prominent firms in Hong Kong, such as Li Ning, Xiaomi, and Sunac China Holdings, fit this profile, with notable offshore trust holdings.
While many founders may not plan such sales, the tax changes may heighten the risk. Experts suggest screening for companies with large founder-controlled stakes held through offshore trusts to identify potential volatility. Investors are closely watching for similar occurrences, as China continues to shift away from land-sale revenue and toward a tax-centric economy.
Written by urgent.news from Straits Times Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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