HONG KONG -China has for the first time issued a notice prohibiting domestic brokerages and their overseas units from taking on new mainland clients for offshore trading, according to an official document seen by Reuters and confirmed by four sources.
New investments by existing mainland clients are also to be “strictly monitored” to prevent investors bypassing China’s foreign exchange controls, the notice said.
The actions, which will restrict capital outflows, come as faltering growth for the world’s second-largest economy has spurred investment overseas, weighing on the yuan and prompting authorities to ramp up efforts to stabilize the currency.
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China Securities Regulatory Commission (CSRC) told brokerages to stop offering securities trading from offshore accounts such as Hong Kong to new mainland investors, according to a Sept. 28 notice issued by its Shanghai unit.
The notice has not been previously reported.
Offshore investments
It was not clear when the new directive was effective, but the sources said they believed the regulator meant effective immediately.
An end-October deadline was set for the removal of apps and websites soliciting mainland clients, the notice also said.
The sources declined to be named as they were not authorized to speak to the media. The CSRC did not immediately respond to a Reuters request for comment.
The notice will mostly affect large brokers such as state-owned Citic Securities, CICC and Haitong Securities. Offshore trading services are a key source of revenue for their Hong Kong units.
The three brokerages did not immediately respond to Reuters requests for comment.
The ban on offshore investments via domestic brokers comes after two online brokerages – Futu Holdings Ltd and UP Fintech Holding Ltd – in May announced the removal of their apps in China amid Beijing’s sharpened focus on data security and capital outflows.
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The use of offshore accounts in Hong Kong entails converting yuan to other currencies.
Chinese individuals are still able to invest in offshore securities either via the Stock Connect with Hong Kong or by using quota-based schemes such as the qualified domestic institutional investor and the qualified domestic limited partnership programs.