Key insights
- China's securities regulator clarified that its crackdown on 'illegal' cross-border investment will not result in forced liquidation of offshore assets. This statement aims to alleviate investor concerns and stabilize markets, particularly U.S.-listed Chinese stocks which had seen a sell-off. While new account openings and funding are restricted, existing offshore services are expected to continue, reducing immediate systemic risk but maintaining regulatory uncertainty.
June 8 (Reuters) - China’s crackdown on "illegal" cross-border investment won’t lead to mainlanders’ offshore accounts being closed and assets liquidated forcibly, the securities regulator said, amid investor concerns over the fate of $54 billion worth of assets.
Some savers from mainland China are travelling to Hong Kong and scrambling to explore options to retain their investments in the financial hub, after Beijing’s unexpected crackdown last month on "illegal" cross-border securities trading.
The clamp-down and the sanctioning of overseas brokers for "illegally" helping Chinese investors buy shares in foreign markets does not affect their business activities offshore, said the watchdog in response to Reuters queries.
The China Securities Regulatory Commission (CSRC) statement is the clearest indication yet that overseas brokerages can continue to offer legitimate offshore services to mainland clients.
The latest statement comes amid growing confusion among Chinese investors over how to deal with their money and investments in offshore brokerage accounts - worth about $54 billion according to Chinese broker Kaiyuan Securities.
Fears of forced liquidation triggered a sell-off in U.S.-listed Chinese stocks immediately after the crackdown was announced on May 22.
"Safety of investors’ assets will not be affected by the rectification campaign," the CSRC said in the statement. "Existing accounts will not be forcibly closed, and assets held in those accounts will not be subject to mandatory cleanup."
Onshore Chinese investors can sell assets and move money out of the affected accounts, while brokers’ provision of illicit services on the mainland, including via websites and trading software, will be terminated in two years, the CSRC said.
Tiger, Futu, Longbridge have told their onshore Chinese clients that starting mid-June, they can no longer open new accounts, add positions, or move in fresh money, but offshore services will remain intact.
The CSRC said that its policy intention is clear - the crackdown was aimed at "purifying" China’s capital markets, protecting investors, and "hitting" illegal capital outflows from the country.
"No country, or region would tolerate overseas institutions conducting illegal activities within its border," it said, and it must be dealt with ruthlessly as they "seriously disrupt market order, increase financial risks, and harm investors."
Responding to Reuters’ question on whether the tightening of capital controls also seeks to nudge money into domestic capital markets, the securities watchdog said that Chinese assets were "appealing", but did not elaborate.
"We welcome both domestic and international investors to participate in China’s capital markets and share the dividends of the country’s high-quality economic growth."
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