Shares of Prudential slumped as much as 13% on Wednesday after a Caixin report said Chinese mainland tax authorities had begun collecting personal income tax on returns earned from offshore insurance policies, raising fresh concerns over Beijing's tightening oversight of cross-border investments, according to Reuters.
The report said tax authorities in Beijing and Hangzhou had started enforcing a 20% personal income tax on returns from Hong Kong insurance policies, including dividend payouts and interest earned on prepaid premiums. The move is seen as part of China's broader efforts to strengthen oversight of outbound capital flows.
The latest development adds to a series of regulatory measures aimed at tightening cross-border investment channels and curbing capital flight from the mainland.
Last month, China's finance ministry and tax authority announced that individual income tax would be imposed on assets held in offshore trusts and on the income generated from those assets.
The latest report also follows Beijing's crackdown in late May on cross-border investments, when authorities penalised three online brokers for helping mainland investors purchase overseas stocks. That action triggered sharp declines in shares of Prudential, AIA, Standard Chartered and HSBC, all of which have significant exposure to mainland Chinese customers, according to Reuters.
Investors have remained concerned that tighter regulations could dampen demand for insurance policies and other financial products sold through Hong Kong.
Hong Kong was Prudential's largest contributor to profits in 2025. In its annual results released in March, the insurer said new business profit in the financial hub grew 12%, driven by stronger sales to both local customers and visitors from mainland China. At the time, the company expressed confidence that demand from mainland visitors would remain resilient.
Prudential did not respond to Reuters' request for comment on Wednesday.
Other financial stocks under pressure
Prudential shares were last trading about 6% lower, extending their losses for the year to around 10%.
HSBC, which has a substantial insurance business in Hong Kong, also fell as much as 6%.
Brokerage Jefferies said the report had triggered investor panic in Prudential shares.
The brokerage's analysts said the tax measures could make Hong Kong insurance products less attractive than comparable domestic offerings. However, they also noted that the move might reduce concerns that Beijing could eventually prohibit offshore insurance sales altogether.
According to the Caixin report, the tax collection drive has been facilitated by information sharing under the Common Reporting Standard, enabling mainland authorities to access details of overseas insurance policies. The report added that enforcement is expected to become more stringent over time.
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