Shortly after landing at the Hong Kong train station, Chinese private investor Feng was opening a stock trading account at a nearby brokerage, hoping to avoid tighter restrictions on capital leaving the country.
Beijing introduced new rules this month to crack down on overseas investment, citing national security concerns and curbs on buying US stocks that were imposed on Chinese investors in May.
Market regulators have classified cross-border stock trading by some online brokers as “illegal” and imposed fines, hoping to stem what analysts say have been record capital outflows in recent years.
But mainland investors are still in Hong Kong, where regulations are relatively looser, hoping to trade US stocks.
Feng, who arrived on an overnight train from eastern China, opened three accounts in one day, telling AFP she did not want to miss the opportunity to invest in American firms.
Although US markets have been volatile recently, “they are still much better than the Chinese stock market,” she said.
Seasoned investor Tao flew to Hong Kong from Shanghai, telling AFP he spent two weeks opening bank and brokerage accounts to maintain access to US stocks.
blow
China has long imposed strict foreign exchange controls on its citizens in order to maintain regulatory sovereignty and stabilize the valuation of its currency, the yuan.
Mainland investors have sought to diversify their holdings in recent years as a debt crisis has crippled China’s property sector, long considered a safe bet to park assets, analysts told AFP.
The new restrictions come after Beijing fined major brokers Futu, Tiger and Longbridge more than US$330 million in May, saying they had helped mainland Chinese investors trade overseas despite lacking required licenses.
Authorities ordered the firms to give up cross-border businesses in China within two years, vowing to “completely eradicate” such illegal operations.
About US$32 billion in Hong Kong and foreign assets held by Chinese investors are traded by the three brokers, according to the companies.
An employee at one of the firms told AFP on condition of anonymity that the severity of the crackdown was unprecedented, despite an earlier penalty in 2022. Investing in US assets in China usually requires going through officially approved channels and is usually subject to ceilings and strict foreign exchange controls.
Developer Iain Wu, a long-time user of the brokerage platform, said investors would miss out on opportunities such as trading newly listed global firms.
The measures signal “China’s efforts to control the outflow of citizens’ funds and assets,” he said.
“I am concerned that regulations will be tightened even further, such as limiting the annual investment quota per person,” Wu added.
“Grey Areas”
Households, institutions and companies moved an estimated record $807 billion in assets moved out of China in 2025, according to a Bloomberg report citing data from the Institute of International Finance.
The exits have come as Chinese policymakers have struggled to maintain a post-pandemic economic revival, with annual growth slowing, consumption stuttering and property sector debt rising.
Top leaders have also spooked some investors by signaling a desire to tackle deep wealth inequality.
May’s sanctions on brokers are the toughest measures taken by officials in years to close loopholes people have long used to circumvent capital controls.
Dick Kay, head of Deloitte’s capital market services group in China, said officials had cracked down on brokers to steer investors to trading through compliant channels, which are more “manageable”.
“Once the so-called gray areas are narrowed or reduced, the requirements for legitimate channels … will expand,” allowing more people to invest through authorized channels, Kay said.
Han Lin, a cross-border finance specialist at consultancy The Asia Group, said Beijing’s move was prompted by “concerns over capital outflows, regulatory sovereignty and unlicensed offshore securities activity”.
Investors increasingly see regulatory risk rather than market risk as the main variable shaping overseas investment access, he told AFP. The rules signal that overseas investment must be conducted “on Beijing’s terms,” Lin said.
Future overseas deals will continue, but approvals will increasingly favor strategic sectors aligned with national priorities.”
