Issued in March, the directive prohibits spouses and children of ministerial-level officials from holding—directly or indirectly—any real estate abroad or shares in entities registered overseas, the people said.

Senior officials and members of their immediate families would also be barred from setting up accounts with overseas financial institutions unless they have legitimate reasons for doing so—such as study or work—the people said….

The directive came as Mr. Xi seeks to minimize geopolitical risks for the Communist Party amid concerns that officials with overseas financial exposure could become a liability if the U.S. and other Western powers impose sanctions against Chinese leaders and their relatives, similar to what was done against Moscow following Russia’s invasion of Ukraine, the people said….

Officials must sign pledges declaring compliance with the new rules, a requirement that would give Mr. Xi more leverage over the political elite ahead of the party’s 20th national congress, which is set to take place late this year….

China’s mounting tensions with the West have fueled concerns that any financial exposure that senior Chinese officials have overseas could be used as leverage against Beijing, particularly after seeing how the U.S. and European governments unleashed far-reaching sanctions against Russia after its Ukraine invasion, some of the people said….

The U.S. has imposed sanctions on a number of Chinese officials in recent years, including freezing any U.S.-based assets they may control, citing their alleged roles in directing rights abuses in the northwestern region of Xinjiang and suppressing civil liberties in Hong Kong. Targets included two members of the party’s 25-member Politburo, specifically Wang Chen, a senior official in China’s legislature, and Chen Quanguo, the Xinjiang party chief from 2016 to 2021.

In April, U.S. Deputy Secretary of State Wendy Sherman said she hoped Beijing “takes the right lessons out of the Russia-Ukraine crisis,” suggesting that the West would impose heavy sanctions on China should it use military force against the democratically self-governed island of Taiwan, which Beijing claims as its territory. Chinese Vice Foreign Minister Le Yucheng insisted that “China won’t be scared” by the threat of sanctions similar to those applied against Russia….