Überall leere Kassen: China hat die Jagd auf die Reichen des Landes freigegeben

China has officially opened its pursuit of the wealthy, as government revenues decline and officials seize on legal—and sometimes questionable—methods to extract funds. For Zhang Wei, a factory owner turned fireworks entrepreneur, the pressure became unbearable. As a waitress led him away from the restaurant's upper floor, Zhang snapped and began demanding money from officials.

The exact amount varied, but Zhang claimed he had broken no rules. When he refused to pay, the officials threatened fines, a situation Zhang knew he couldn't escape, even if he hadn't violated any laws—government arbitrariness in authoritarian China.

With declining state revenues, officials target the country's millionaires, who are understandably agitated. Zhang Wei built his fortune in a southern Chinese town, exporting fireworks worth multiple millions. Now, he seeks to transfer his wealth to Europe to protect it from government scrutiny and ensure its availability for his children.

The reason behind officials' relentless pursuit of entrepreneurs like Zhang is simple: China needs money. The real estate crisis has drained local governments' coffers, as property sales to developers dried up. To find new revenue sources, authorities are "picking pockets everywhere," as China expert Bill Bishop put it. On highways, they stop heavily loaded trucks and weigh them, often using manipulated scales.

In some cities, authorities demand a toll for helping residents transfer more than $50,000 out of the country—the annual limit.

Such incidents are not isolated; they occur regularly across China. Officials are justified in their actions, as public coffers are empty, and local governments have been paying public sector employees, including teachers and bus drivers, for years without salaries. To cope with the financial crisis, authorities are becoming inventive.

The government is currently targeting wealthy Chinese who have invested abroad, demanding unpaid capital gains taxes. Chinese law has always required citizens to pay taxes on their worldwide income, including profits from stocks, bonds, real estate, or simple savings accounts. However, China only recently started evaluating the massive data influx from the Common Reporting Standard, an information-sharing system among numerous countries.

This allowed Chinese financial authorities to gain a rough overview of their citizens' tax liabilities. Over the past two and a half decades, hundreds of thousands of Chinese grew wealthy, with annual per capita incomes rising from $1,000 to $14,000 since 2001. Today, there are over 500 millionaires in China, with many storing assets in London, American stocks, or Western art.

Chinese individuals hold around $1.7 trillion in Hong Kong accounts alone. The government is pressing hard, sending letters, calls, and text messages to overdue taxpayers in various provinces. Some authorities have even formed special task forces to track down individual billionaires. Those affected have until the end of October to settle their tax debts without incurring fines.

Chinese authorities demand taxes for the past three years, in some cases five years. Many wealthy individuals are now engaging legal counsel and tax advisors to defend themselves against these demands. However, success is unlikely. Some overdue taxpayers are attempting to change their citizenship to avoid the obligation, according to experts.

"The run on foreign passports has begun," said Alicia Garcia Herrero of Natixis in Hong Kong. One of the biggest challenges is determining the exact tax liability, as authorities sometimes provide an exact figure, while others offer only an approximate amount, seen as a starting point for negotiations. Chinese tax authorities seem to be still figuring out their approach, but they are not likely to ease up. Many investors remain uncertain about what to expect.