Haidilao’s stock rout exposes funding risk from Beijing’s taxation crackdown as payments loom

Investors are eyeing whether tax-related share sales spread to other companies with founders’ wealth held through overseas structures The turmoil surrounding Chinese hotpot chain restaurant operator Haidilao International Holding could serve as a warning to investors of the funding risks stemming from Beijing’s new taxation regime on overseas assets held by wealthy individuals. A plan by Shu Ping, the co-founder and wife of Haidilao chairman Zhang Yong, to sell 259 million shares – a 4.65 per cent stake – sent the stock plunging 10 per cent in Hong Kong this week. While Haidilao said the stake reduction, which stands to generate about HK$2.75 billion (US$351 million) in proceeds for Shu, was intended for personal funding needs, investors promptly linked it to the implementation of a new income tax on offshore trusts. The regulatory framework requires the owners of such trusts – typically established in Hong Kong, Singapore or the Cayman Islands – to declare assets and remit tax payments before a 90-day grace period expires in October. The new tax could add to the financial pressure on offshore-trust owners, potentially prompting them to raise funds through stake sales before the payment deadline.

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