The situation is ironic because Beijing has been liberalising capital markets to encourage inward investment.

Chinese officials are planning to ban online brokerages such as Futu Holdings and UP Fintech Holding from offering offshore trading services to mainland clients, Reuters reported last Friday. The move is the latest part of Beijing’s regulatory hits to sectors over the past 12 months.

The firms, which are listed on the US Nasdaq, are major players in the sector. A ban would block millions of retail investors in mainland China from trading securities easily in markets such as the US and Hong Kong. Concerns over data security and capital outflows are driving the potential ban, sources told the newswire.

The situation is ironic because Beijing has been liberalising capital markets to encourage inward investment. A number of banks and asset managers have taken advantage of the situation, a move that some such as hedge fund rainmaker George Soros has dubbed a “tragic mistake.”

Earlier in 2021, authorities cracked down on sectors such as after-hours/for-profit education, video games, forms of finance and real estate. This hit financial markets and raised worries about the risks of doing business with China. With the defaults of property developer Evergrande, China’s real estate sector has been causing consternation both domestically and internationally. 

Futu and UP Fintech are both registered with the Securities and Futures Commission in Hong Kong but that permit does not extend to the mainland, the news service’s report added.