The
China Securities Regulatory Commission (CSRC) has issued a notice prohibiting
domestic brokerages and their overseas units from accepting new mainland
clients for offshore trading. This action marks the first time that such restrictions
have been imposed. Such impalement signals China’s commitment to manage capital
outflows and stabilize its currency.
The
notice, dated September 28, 2023, issued by the CSRC’s Shanghai unit, has not
been previously reported. The exact effective date was not specified. Sources
familiar with the matter believe the regulator intended for the measures to
take effect immediately. The notice also sets an end-October deadline for the
removal of apps and websites soliciting mainland clients.
These
new measures will also extend to monitor and restrict new investments by
existing mainland clients to prevent potential avoidance of China’s foreign
exchange controls.
The
move comes amid concerns about the state of China’s economy. China’s economy
has been experiencing slower growth, prompting an increase in overseas
investments by Chinese citizens. These capital outflows have placed pressure on
the yuan’s exchange rate. The Chinese government has been actively working to
stabilize the currency and maintain control over capital flows.
The
notice is expected to impact a range of brokerage firms, particularly those
with significant offshore trading operations, such as state-owned giants like
Citic Securities, China
International Capital Corporation (CICC), and Haitong Securities.
These
companies have substantial Hong Kong-based units that generate a considerable
portion of their revenue from offshore trading services. As of the time of this
report, these brokerages had not yet responded to requests for comment from
Reuters.
Exclusive: China bars brokerages from accepting new mainland clients for offshore trading, say sources https://t.co/PAvQb8sfRG pic.twitter.com/qk3cueNyTO
— Reuters (@Reuters) October 12, 2023
A Look Back at Offshore Trading
Actions in China
This
move is not the first in recent times related to offshore trading and
investments. Earlier this year, two online brokerages, Futu Holdings Ltd and UP
Fintech Holding Ltd, voluntarily removed their apps in China, citing concerns
over data security and capital outflows, aligning with Beijing’s stricter focus
on these issues.
It
is important to note that Chinese individuals will still be able to invest in
offshore securities through established channels, including the Stock Connect
program with Hong Kong and quota-based schemes such as the qualified domestic
institutional investor (QDII) and the qualified domestic limited partnership
(QDLP) programs.
The
implementation of these new measures underscores China‘s commitment to
exert greater control over capital outflows and maintain stability in its
financial markets.
The
financial industry
will be closely monitoring the impact of these restrictions and how they will
affect offshore trading and investments in the coming months. The CSRC has not
responded to Reuters’ request for comment at the time of this report.
The
China Securities Regulatory Commission (CSRC) has issued a notice prohibiting
domestic brokerages and their overseas units from accepting new mainland
clients for offshore trading. This action marks the first time that such restrictions
have been imposed. Such impalement signals China’s commitment to manage capital
outflows and stabilize its currency.
The
notice, dated September 28, 2023, issued by the CSRC’s Shanghai unit, has not
been previously reported. The exact effective date was not specified. Sources
familiar with the matter believe the regulator intended for the measures to
take effect immediately. The notice also sets an end-October deadline for the
removal of apps and websites soliciting mainland clients.
These
new measures will also extend to monitor and restrict new investments by
existing mainland clients to prevent potential avoidance of China’s foreign
exchange controls.
The
move comes amid concerns about the state of China’s economy. China’s economy
has been experiencing slower growth, prompting an increase in overseas
investments by Chinese citizens. These capital outflows have placed pressure on
the yuan’s exchange rate. The Chinese government has been actively working to
stabilize the currency and maintain control over capital flows.
The
notice is expected to impact a range of brokerage firms, particularly those
with significant offshore trading operations, such as state-owned giants like
Citic Securities, China
International Capital Corporation (CICC), and Haitong Securities.
These
companies have substantial Hong Kong-based units that generate a considerable
portion of their revenue from offshore trading services. As of the time of this
report, these brokerages had not yet responded to requests for comment from
Reuters.
Exclusive: China bars brokerages from accepting new mainland clients for offshore trading, say sources https://t.co/PAvQb8sfRG pic.twitter.com/qk3cueNyTO
— Reuters (@Reuters) October 12, 2023
A Look Back at Offshore Trading
Actions in China
This
move is not the first in recent times related to offshore trading and
investments. Earlier this year, two online brokerages, Futu Holdings Ltd and UP
Fintech Holding Ltd, voluntarily removed their apps in China, citing concerns
over data security and capital outflows, aligning with Beijing’s stricter focus
on these issues.
It
is important to note that Chinese individuals will still be able to invest in
offshore securities through established channels, including the Stock Connect
program with Hong Kong and quota-based schemes such as the qualified domestic
institutional investor (QDII) and the qualified domestic limited partnership
(QDLP) programs.
The
implementation of these new measures underscores China‘s commitment to
exert greater control over capital outflows and maintain stability in its
financial markets.
The
financial industry
will be closely monitoring the impact of these restrictions and how they will
affect offshore trading and investments in the coming months. The CSRC has not
responded to Reuters’ request for comment at the time of this report.
