China intensifies crackdown on foreign brokerages that attract investors from the country

China announced this Friday a large-scale operation against illegal cross-border investments. The country’s securities regulator, in conjunction with seven government agencies including the central bank, will punish brokers accused of illegally moving money to foreign markets. The action resulted in a sharp drop in shares of online brokerages and Chinese companies listed abroad.

Comissão Reguladora of Valores Mobiliários of China (CSRC) identified brokers Tiger, Futu and Longbridge as targets of the campaign. Essas companies solicited business from China without an authorized local license. Futu shares fell more than 30% in pre-market trading on Estados Unidos. UP Fintech Holding, parent company of Tiger, recorded a similar drop. The CSRC statement stated that illegal winnings will be confiscated, although it did not detail the amounts of financial fines.

Impacto immediate in Chinese markets

The effects of the measure spread quickly across global markets. Empresas popular Chinese companies listed abroad suffered significant devaluations. PDD marketplace operator Holdings fell significantly in pre-market. Alibaba and JD.com recorded drops between 3.5% and 6%. The KraneShares ETF of Chinese internet companies, which tracks the sector, fell 4.3%.

The announcement came after markets closed on mainland China and Hong Kong. Hang Seng futures fell 1.5% in reaction to the news. Steven Leung, director of institutional sales at UOB-Kay Hian at Hong Kong, noted that in the short term these measures could cool trading activities and speculation in the market.

Restrições operational for two years

The CSRC has established a two-year grace period to terminate illegal activities. Durante During this period, customers of affected brokers will only be able to sell existing investments and withdraw funds. Novos investments will be completely prohibited. Essa restriction significantly reduces the revenue opportunities of the brokers involved, especially considering that the sale of shares to retail clients represents a substantial portion of their revenues.

Futu disclosed that, at the end of the first quarter, mainland China investors represented 13% of its total customer base. The company said in a statement that it has always considered compliance a top priority, that it has rejected tens of thousands of applications from China mainland candidates who did not meet the requirements, and that it has previously stopped opening accounts for new China mainland customers.

A spokesperson for Tiger stated that the company observes the CSRC statement, will fully cooperate with regulators, and that all business operations remain normal. Longbridge, which is not on the list of penalized companies, did not immediately respond to a request for comment on the operation.

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Contexto of Increasing Regulatory Scrutiny

The crackdown announced this Friday extends years of scrutiny over international capital flows. Scrutiny intensified in late 2022, when the CSRC had already banned foreign institutions from opening accounts for mainland China investors. The current measure represents a deepening of this control policy. Gary Ng, senior economist for Ásia-Pacific at Natixis, explained that the Chinese government seeks to ensure that all outbound capital flows are under its direct oversight.

The action coincides with repression of domestic markets and aims, according to the regulators themselves, to protect the healthy development of the capital market, channel foreign investments through authorized legal channels and protect investors. China has maintained strict controls over capital outflows for decades, but the new operation significantly expands the scope of that control by focusing on foreign brokers and their local partners.

Revisão on Hong Kong Identifies Weaknesses in Brokers

Em Hong Kong, the financial center where most of the accounts in question are located, Comissão of Valores Mobiliários and Futuros (SFC) also updated its supervision. The SFC said on Friday it had discovered significant deficiencies after carrying out a review of 12 different brokers. The commission will require these brokers to close accounts opened with questionable or falsified documents. Além should also intensify checks on new accounts and more rigorously monitor their funding sources.

Hong Kong’s capital markets are booming. Conforme data from KPMG, the city took first place globally in the first quarter, with companies raising HK$209.9 billion, equivalent to US$26.79 billion. Apesar of this expansion, exchanges will now face tighter operational restrictions.

Avaliação from experts on penalties

Profissionais from the legal and financial sector differ on the severity of the penalties. Zhan Kai, partner at law firm Dacheng at Xangai, said the penalties appear relatively lenient for now, although the possibility of larger fines in the future or even criminal prosecution cannot be ruled out. The lack of details on specific fine amounts in the CSRC statement leaves room for more severe future action.

A relevant factor is the importance of online brokers in the capital market. Futu has acted as an underwriter on more than 80 listings since the beginning of 2025. Tiger has acted as an underwriter on more than 45 listings in the same period, stock exchange records show. Essas activities have generated significant revenue for companies and will now be subject to direct restrictions.

Reação from brokers to regulatory operation

• Tiger: declared compliance with regulations, full cooperation and normal business operations
• Futu: asserted high standards of compliance, rejection of tens of thousands of inappropriate requests, and that mainland China investors represent 13% of its customer base
• PDD Holdings: suffered significant drop in pre-market trading
• Alibaba and JD.com: recorded drops between 3.5% and 6%
• Longbridge: Did not immediately respond to requests for comment