The Hong Kong Economic Times (HKET) reported that the Shanghai Supervision Bureau of the China Securities Regulatory Commission issued a notice on September 28 requiring Chinese securities firms to stop providing new investors from Mainland China with securities trading services via Hong Kong accounts and other offshore accounts. Existing accounts held by Mainland Chinese are to be strictly monitored so as to prevent investors from bypassing China’s foreign exchange regulatory rules. This is the first time that China has explicitly limited Mainland Chinese investors ability to use foreign trading accounts.
The move serves to limit capital outflows and to support the RMB, which is facing downward pressure. The targeted offshore accounts are relatively more difficult for the authorities to control. This contrasts with cross-border trading through formally-sanctioned channels such as Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect, where the authorities are better able to ensure that Mainland investors’ funds will be managed in a “closed loop,” that is, when securities are sold, the funds will immediately flow back into the RMB instead of into another currency. When Chinese investors use offshore investment accounts to invest abroad, it is more difficult for the Chinese authorities to manage the use currencies other than the RMB.
Although the new instruction does not clearly specify the implementation date, sources said that the regulatory agency’s intention is for the regulation to take effect immediately. Brokerages will need to remove apps or websites that attract Mainland customers by the end of October.
The article by HKET, which is Hong Kong’s leading financial daily paper, cited Reuters, which in turn cited four anonymous sources.
HKET, October 12, 2023
Yahoo Finance Hong Kong, October 12, 2023