China Implements Ban on New Offshore Brokerage Accounts to Curb Circumvention of Forex Controls

China Implements Ban on New Offshore Brokerage Accounts to Curb Circumvention of Forex Controls

CompaniesKtl Offshore Trading (malaysia) ⁢Sdn. Bhd.FollowChina International Capital​ Corp LtdFollowCITIC Securities Co LtdFollowShow more companiesHONG⁤ KONG, Oct 12 (Reuters) – China has for the first time issued ⁢a ​notice prohibiting domestic brokerages and their⁣ overseas ⁤units ⁢from taking on new mainland clients​ for offshore trading, according to an official document seen by Reuters and⁢ confirmed⁢ by four sources.New investments‌ by existing mainland clients are also to be “strictly monitored” to prevent investors from bypassing China’s foreign exchange controls, ‍said the notice. ​The news‌ was first reported by Reuters.The actions, which will restrict capital outflows, ⁤come ‍as faltering growth for the ‍world’s second-largest economy has spurred investment overseas, weighing on the yuan and prompting authorities to ramp up efforts to⁢ stabilise the ⁣currency.The‍ yuan, ‍one of ⁣Asia’s worst-performing currencies, has weakened 5.5% this year as China’s post-pandemic recovery quickly⁣ lost steam and the dollar climbed due to interest rate differentials and geopolitical uncertainty globally.That has forced authorities to unveil a ⁢slew of measures in recent⁤ months to stem its decline.The⁤ China Securities ⁤Regulatory⁣ Commission (CSRC) has told brokerages ⁢to ​stop offering securities ⁣trading from offshore accounts such as Hong Kong to new mainland investors, according to a Sept. 28⁤ notice issued by its Shanghai unit.Activities now considered illegal⁤ include⁣ cross-border securities broking, ⁢securities lending, fund sales and investment consulting, according to the notice.The CSRC said in a statement late on⁣ Thursday ⁣that in January it initiated “standardization and rectification work” on ​illegal cross-border business expansion ‌of overseas subsidiaries of‌ brokerages.The​ latest regulatory requirement is a continuation of that work, and⁤ the notice ‍issued last month mainly clarified “some specific requirements and has ⁣no substantive changes”, it said after the publication of ‌Reuters story.It’s the duty of ​the CSRC to rectify “illegal cross-border” securities transactions, and⁣ that has “no direct relationship with the ​strengthening of foreign exchange controls ⁢the report refers ‌to”, the regulator added.It was not clear when the CSRC’s new directive​ to ⁣domestic brokerages was⁤ effective, but ‍the​ sources said they believed the regulator meant effective immediately.An ​end of October deadline has ⁤been ‍set for the removal of apps and ⁤websites ⁣soliciting mainland clients, the‌ notice ⁤also said, adding⁤ that offline channels for ⁣opening accounts should ⁢also be shut down.The sources declined⁢ to be named as​ they were not authorised to speak to the media.”We believe the main policy purpose is to curb capital outflows, especially in the context of yuan depreciation pressure,” said Shujin Chen, head of China financial and property research at ⁢Jefferies.”From⁣ an industry perspective,‍ the impact ⁢will be greater on brokerage firms with larger ‍offshore retail business.”For brokerages…

Link ‌from​ www.reuters.com rnrn

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