China Penalizes Overseas Brokerages; Analysts Say Goal is to Stop Capital Flight

Central News Agency, Hong Kong, May 25. According to analysts, China's recent announcement of penalties against three overseas brokerages is aimed at stopping capital flight from the mainland in the long run. The China Securities Regulatory Commission (CSRC) recently announced penalties against Tiger Brokers (NZ) Limited, Futu Securities International (Hong Kong) Limited, and Longbridge Securities (Hong Kong) Limited, citing illegal securities business operations within mainland China. Hong Kong's Hong Kong Economic Journal published an expert article today stating that, in the long term, this move by the CSRC symbolizes that mainland authorities are increasingly taking illegal overseas investment by residents seriously. They are cracking down severely, especially to prevent foreign exchange loss and ensure that 'the wealth stays at home.' The article states, 'This means that if mainland residents want to move funds abroad or conduct overseas investments, it will become even more difficult in the future.' The article notes that while mainland residents can still trade overseas stocks through legal channels like 'Stock Connect,' they cannot directly invest in the U.S. market and are subject to 'closed-loop' restrictions. Even if they profit, they must convert the funds back into RMB for use within the mainland, preventing them from 'moving capital out.' Brokerages like Tiger Brokers provide not only Hong Kong stock services but also focus on U.S. stock investments, which have been very popular among mainland investors due to recent market highs. However, the article argues that the CSRC's action is not as severe as imagined because the fines are relatively light. Futu confirmed it was fined 1.85 billion RMB (approx. 8.5 billion NTD), which is 18% of last year's profit. Tiger Brokers confirmed the confiscation of 103.1 million RMB in illegal gains and a fine of 308.1 million RMB, totaling about 35% of last year's profit. The article concludes that these fines are relatively light and the CSRC's action can be considered 'lenient.'