Wealthy Chinese move offshore money to U.S. banks as Beijing’s tax net widens

Chinese households are increasingly allocating their assets to more lucrative investments both domestically and internationally, despite growing oversight, according to Moody's Ratings. A prolonged decline in the Chinese property market and low interest rates are driving this shift towards alternative investments, the ratings agency reported this week.

Investors are seeking opportunities that promise higher returns than traditional bank deposits while maintaining a relatively low level of risk. In response to this trend, China has stepped up its efforts to enforce a 20% capital gains tax on offshore investments, with the aim of increasing oversight of citizens' offshore investments.

This policy may lead to a moderation in the growth of offshore investments in the near term, as financial institutions implement more rigorous customer onboarding procedures. However, Moody's believes that these measures will not dampen demand, as offshore investments continue to offer a significant yield advantage over domestic alternatives.

The country has been progressively reducing its benchmark one-year loan prime rate since 2020, aiming to counteract slowing economic growth, a shrinking property sector, and disruptions caused by the Covid-19 pandemic that have adversely affected employment and consumption. Consequently, property values have declined, prompting domestic banks to reduce deposit rates.

As of the end of 2022, real estate represented 47% of Chinese household assets, while bank deposits accounted for 25%. Both indicators have been declining since then. In 2024, the outstanding balance of mainland Chinese financial products surged by 13.9%, and in 2025, it grew by 15.5%. Simultaneously, retail bank deposits increased by only 10.4% in 2024 and 9.7% in 2025.

Bank wealth management products, mutual funds, and insurance policies have experienced rapid growth as alternative investment tools, the report noted. The Moody's analysis highlights Hong Kong as a key source of interest for Chinese investors. Special schemes like the Hong Kong-mainland China Stock Connect and Wealth Management Connect provide regulated channels for Chinese investors to trade equities and exchange-traded funds in Hong Kong.

The daily turnover of the Southbound Stock Connect, representing transactions from the mainland, reached HK$121.1 billion (US$15.4 billion) in 2025, more than double the HK$48.2 billion recorded in 2024, according to Hong Kong Exchanges and Clearing. Additionally, sales of non-exchange-traded investment products, such as pooled investment funds, grew by 40% in 2024 and 63% in 2025, according to a survey conducted by the Hong Kong Monetary Authority and Securities and Futures Commission.

High-net-worth investors from Asia-Pacific, including mainland China, have been instrumental in driving the surge in Hong Kong's asset and wealth management market, the monetary authority reported in 2025.