| Hi, this is Allen Wan in Shanghai. Xi Jinping's China is a tough place to live for the uber-wealthy. Besides cracking down on the private sector and launching a "common prosperity" campaign aimed at reducing the wealth gap, the Chinese government is now enforcing a long-overlooked tax on overseas investment gains by the ultra-rich. Some wealthy individuals in major cities were told in recent months to conduct self-assessments or summoned by tax authorities for meetings to evaluate potential payments, including those in arrears, according to people familiar with the matter. They face up to 20% levies on investment gains, and some are also subject to penalties on overdue payments. China isn't alone among major countries in making this move. It follows the Common Reporting Standard, a global information-sharing system aimed at preventing tax evasion. As an American who pays his fare share of pretty steep taxes in China, my reaction was welcome to the club. While local regulations have always stipulated that residents be taxed on worldwide income, including investment gains, it has rarely been enforced until recently. Some of the targeted Chinese apparently had at least $10 million in offshore assets, while others were shareholders of companies listed in Hong Kong and the US. The larger question is why now? The government isn't that hard up for money but the world's second-biggest economy is going through an unprecedented slowdown, highlighted by data showing growth slowed in the third quarter. A long-running property crisis has exacerbated the problem by depriving local governments of income from land sales. That issue partly explains why consumers are less willing to spend than in the past. These are some of the reasons China may boost its fiscal deficit ratio to the highest ever to pay for more economic stimulus. With the prospect that Beijing may miss its growth target for this year, authorities rolled out stimulus measures over the past month that sent the stock market soaring. That euphoria has given way to disappointment with policymakers, who have offered few details on spending plans. A briefing by the housing minister ended up as another damp squib, renewing fears that Beijing's stimulus efforts will not be enough to revive growth. Taxing the wealthy is a fairly easy win but it risks driving away more well-heeled businessmen and entrepreneurs. Some of them have already left the country in recent years, a trend that coincides with Xi and his ruling party taking an ever larger role in people's lives. Still, China has millions of rich people, trailing only the US in terms of number of millionaires. That's a pretty fat target for the taxman. What We're Reading, Listening to and Watching: China's military this week did more practice encircling Taiwan, a democracy some 100 miles away that Xi has made clear he wants brought under Beijing's control. Like previous exercises going back to summer 2022 when then-House speaker Nancy Pelosi visited Taipei, the People's Liberation Army went further and farther. The zones it operated in were a touch closer to Taiwan, and a record number of warplanes crossed a key line between the two. Like the Pelosi drills, China apparently tested missiles, though not in the strait. In a first, the China's Coast Guard carried out patrols around Taiwan's main island. That adds to the service's record of getting into testy encounters with Philippine vessels over territorial claims in the South China Sea — as happened again recently.  Lai Ching-te, Taiwan's president (center), during military drills in July. Photographer: I-Hwa Cheng/Bloomberg The PLA maneuvers once again roiled East Asia, even if only briefly. Taiwan condemned the exercises, saying they disrupted peace and stability in the region. The US, Taipei's main military supporter, said it was "seriously concerned." Japan also told China it was worried about the situation and even scrambled fighter jets because some of the PLA activity happened near one of its smaller islands. Russia reportedly sailed ships near Japan as a warning to stay out of any fight. Day-to-day life went on as normal for the archipelago's 23 million people, and markets shrugged off the distraction. Still, investors shouldn't ignore the risks related to the Taiwan issue. China had already planned to hold more drills this year around Taiwan, which sits next to a major shipping lane and is home to companies that make some of the world's most advanced computer chips. Yet it timed the maneuvers to follow a big speech by the island's new president, Lai Ching-te. In it, Lai repeated that neither side of the strait was subordinate to the other, a remark that prompted China's military to say its exercises were intended as a warning against any kind of "separatism." Since the PLA's busy day around Taiwan, China has made clear it's not finished trying to intimidate the island. The day after, Xi visited Fujian, the province right across from Taiwan – a move signaling his determination on the issue. Also, the PLA promised it would respond whenever it is "provoked," saying the Taiwanese needed to "understand that a sharp sword hangs high over their heads." The world's biggest military by number of troops will get its next chance soon. The island's former president, Tsai Ing-wen, may visit the US in the coming weeks. Beijing has already voiced its displeasure with those plans. | 
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