BEIJING – Chinese investors are rushing to find alternative ways to buy and sell overseas equities after Beijing launched its most forceful crackdown on illicit cross-border stock trading to stem capital outflows.
Richard Wang, who works in artificial intelligence in the United States and has around US$120,000 (S$153,000) in stock holdings with Futu Holdings, said he dumped his US stocks on May 22 after China moved with its most stern action yet to plug capital control loopholes. He’s waiting for the Hong Kong market to open again on May 26 to sell his remaining positions.
The surprise triggered swift reactions on May 22, with the Nasdaq Golden Dragon China Index slumping 2.2 per cent, as shares of Futu plunged 28 per cent. The wealth of Leaf Li, Futu’s billionaire founder and chief executive officer, slumped by US$1.7 billion to US$4.7 billion as at May 22, according to the Bloomberg Billionaires Index.
The fallout is likely to spread to Hong Kong when the market re-opens as the move threatens to curb the city’s liquidity and its booming initial public offerings (IPOs) amid dwindling demand from mainland Chinese investors.
An estimated US$1 trillion of so-called hot money flowed out of the country in 2025, according to an index compiled by Bloomberg Intelligence – the biggest annual outflow since data began in 2006.
Citic Securities estimates that the clampdown could affect as much as HK$250 billion (S$40.7 billion) of assets in Hong Kong, with Futu alone accounting for around HK$150 billion to HK$180 billion. Futu underwrote 30 IPOs in Hong Kong in 2026, more than any other banks, according to data compiled by Bloomberg.
“China is concerned of more capital outflows so it’s shutting the cross-border trading channel and forcing the funds back to domestic markets,” Mr Wang said from California. “So I quit.”
The crackdown marks an escalation from late 2022 when China ordered online brokers to rectify illegal business activities and stop onboarding new onshore investors, signaling growing impatience with the cross-border flows. The China Securities Regulatory Commission, the nation’s top securities watchdog, on May 22y slapped more than US$330 million of combined fines on Futu, Up Fintech Holding’s Tiger Brokers and Longbridge Securities for operating on the mainland without a licence.
Investors like Daisy Qin have managed to circumvent the 2022 directive and set up new accounts using falsified documentation. Ms Qin, a bank employee in Chengdu, said she opened an account with Futu in 2025 using address details of a Hong Kong friend so she could subscribe to IPOs in the city.
She rushed to check with other brokerages over the weekend for workarounds, only to find out the account opening requirements had been further tightened. Now she’s ready to dump all two million yuan (S$375,000) worth of shares.
“Some people are now preparing to move to other brokers in Singapore or the US, but I’m not going to wait for the detailed rules. I also don’t plan to open a new account,” she said. “I’ll sell my holdings and exit immediately to avoid risks.”
Banks are already picking up the slack. Allen Wang, a Shanghai-based partner at Jincheng Tongda & Neal Law Firm, said some clients have started shifting their trading of offshore stocks to firms such as Bank of China’s Hong Kong branch or HSBC Holdings, where cross-border trading is still allowed. Investors don’t need to sell their holdings as the accounts can be moved via a custodian transfer, he said.
While banks have long been a viable but less attractive option than brokers like Futu due to higher fees and lower efficiency, “now they’re in a stronger position,” Mr Wang said. “The policy is bit unclear at the moment, but clients are worried the banks will be banned too.”
Local Hong Kong arms of some Chinese brokerages are also awaiting further policy clarity to gauge the scope of the impact, before making changes to their businesses, according to people familiar with the matter. Some remained hopeful that existing accounts opened before 2022 might be excluded from the recent clampdown.
While Chinese authorities allowed online brokers to continue servicing existing clients in 2022, they on May 22 ordered all “illegal” exisiting accounts to be liquidated within two years. Beijing has said the measures are designed to clean up the capital market and steer investors toward regulated channels for overseas investment. BLOOMBERG
