China has launched a dramatic clampdown on cross-border brokerages, vowing to completely root out illicit overseas investment activity in two years. The tightening of the country’s already prohibitive capital controls has rattled the US-listed shares of brokers and sown anxiety among Chinese users of the platforms.

Authorities have also said they intend to fine Futu Securities, Tiger Brokers and Longbridge—all of which are licensed to operate in Hong Kong—a combined RMB 2.26 billion (USD 332.7 million) for allegedly conducting unapproved business in mainland China.

Here’s what to make of the crackdown.

What’s the scope?

On May 22, the China Securities Regulatory Commission (CSRC) announced that authorities aim to stamp out “an entire supply chain” that fuels illegal trading of overseas securities, from marketing activities and account openings to trade execution and fund transfers.

The regulator indicated the crackdown could extend to any player involved in this chain, even online influencers making referrals to brokerage platforms or offering stock recommendations.

Besides the three brokers that have been named, mainland investors are known to trade overseas stocks through similar unlicensed platforms owned and run by Chinese nationals. The CSRC outlined a two-year phaseout, whereby the brokers are only allowed to process sell transactions and withdrawals for existing mainland clients.

After that, any mainland operations, including websites and servers, will be closed permanently.

Hong Kong assets worth around HKD 200–250 billion (USD 25.5–31.9 billion) are expected to be affected, according to estimates by analysts at CITIC Securities. Futu Securities alone accounts for around HKD 150–180 billion (USD 19.1–23.0 billion) of that.

In a statement to Nikkei Asia, Futu said it cannot provide a comprehensive plan until detailed regulatory provisions have been finalized. Once that happens, the company said it will “announce concrete arrangements and notify affected clients at the earliest opportunity.”

How is this different from the brokerage crackdown a few years back?

Over the years, Chinese officials have tightened scrutiny on mainland investors using cross-border brokerages to trade in the Hong Kong and US stock markets, which are generally beyond the reach of the average retail investor.

At the end of 2022, the CSRC accused Futu and Tiger Brokers of operating illegally in mainland China. The two companies pulled their applications from Chinese app stores the following year, and pledged to adhere to capital control laws by requiring mainland Chinese clients to provide proof of overseas residency in order to open accounts.

Sources familiar with the situation, however, suggested that this did not slam the door.

Existing clients of the brokerages continued to trade and make deposits, as regulators had said that existing users would not be affected, people close to one leading brokerage told Nikkei Asia on condition of anonymity. Meanwhile, the platforms’ controls appear to have been lax, allowing mainland Chinese to exploit opportunities to open accounts through third-party agents. On China’s social media platforms, instructions on how to open overseas brokerage accounts were not targeted by internet censors.

“This crackdown is far tougher and more systematic” than past, mostly verbal warnings, said Dan Wang, China director at Eurasia Group. The large fines, two-year phaseout and full ban on unlicensed cross-border securities operations constitute “a decisive cleanup,” Wang said.

The fines are equivalent to around 10% of Futu’s and Tiger Brokers’ respective revenues in 2025, according to CITIC.

Even so, Karen Hizon, Asia Pacific equity strategist at UBS Investment Bank, said that the measures are “not outside of the ordinary” in China.

Unlike in the days of Beijing’s broader tech crackdown a few years ago, which fueled concerns that the country had become “uninvestable,” Hizon said that investor sentiment has improved thanks to measures to support the financial markets. As a result, she believes Chinese investors are likely to shake off the latest move.

Why is Beijing doing this now?

Under China’s current capital control laws, each mainland individual has a USD 50,000 annual quota for forex and international transfers. Those who wish to invest overseas can only purchase a limited range of products through a licensed asset manager or brokerage in China. Mainland retail investors can open Hong Kong stock accounts if they meet certain cash requirements, but they can only trade shares qualified for the Southbound Stock Connect program.

For years, cross-border brokers effectively helped Chinese investors bypass these controls and inadvertently allowed capital outflows. In doing so, they crossed what the government sees as the most fundamental of all financial regulations for ensuring stability.

“By closing loopholes, policymakers aim to ease depreciation pressure on the RMB and signal that cross-border capital flows will be strictly supervised via official channels only,” Eurasia Group’s Wang said, referring to the yuan or renminbi.

China’s ruling party is due to hold its 21st party congress next year, when President Xi Jinping is expected to begin an unprecedented fourth term. With that on the horizon, Chinese officials are increasingly conservative about risks, Wang said, stressing that “stability in prices and stock markets are binding requirements for them.”

What does all this mean for Hong Kong?

Mainland capital has been pivotal in supporting the Hong Kong market’s liquidity and fueling a listing boom over the past year. The crackdown means that client assets on overseas brokers will need to be remitted back to the mainland, potentially reducing that liquidity.

Still, while Hong Kong stocks are popular investments for mainland Chinese users on the trading platforms, CITIC analysts emphasized that holdings include not only stocks but also funds and derivatives, meaning the impact will not be felt as a one-time forced liquidation of Hong Kong shares.

The HKD 200–250 billion (USD 25.5–31.9 billion) in question is in the ballpark of market turnover in a single day.

Before the crackdown in 2022, some Hong Kong-listed Chinese tech giants such as Tencent Holdings could credit employee incentive shares to Futu accounts. But when Futu stopped bringing on new mainland users, Tencent shifted the program to a system provided by Bank of China International, which allowed employees to sell their shares but not purchase additional ones, according to a person familiar with the matter.

Under the current setup, sale proceeds are credited directly to mainland Chinese bank accounts in Hong Kong dollars. Afterward, employees may choose to convert the funds into yuan. This arrangement creates a closed-loop system, the person said.

What are investors and analysts watching for next?

Since the warnings a few years ago, Futu and Tiger Brokers have been diversifying away from mainland Chinese clientele.

According to Futu’s financial report, mainland clients accounted for around 13% of asset holders at the end of March 2026. For Tiger Brokers, mainland retail clients’ assets made up around 10% of the total at the end of 2025.

An S&P Global report released on May 26 said that despite the inevitable strain on earnings, Futu’s other operations should help the company cope.

“We expect Futu’s non-mainland business to continue to grow over the next two years,” S&P Global said. “The company saw strong growth in its client base in Hong Kong and overseas, which boosted its revenue by over 65% in 2025.”

The brokers’ own market performance has been resilient so far. After plunging on last week’s news, Futu’s Nasdaq-listed shares rebounded 20% on Tuesday, while Tiger Brokers’ jumped around 15%.

Goldman Sachs expects the regulatory impact on Futu and Tiger to be felt mainly in the second half of 2026, as authorities move forward with fines and demand remediation of noncompliant mainland accounts. The investment bank cut its 2026 net profit forecasts for Futu by 25% and for Tiger by 60%.

It added that profit growth could slow further as the brokers pursue expansion overseas, where customer acquisition costs are higher and average assets are lower.

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.

Note: HKD, RMB figures are converted to USD at rates of HKD 7.83 (USD 1) = USD 1 and RMB 6.79 (USD 1) = USD 1 based on estimates as of May 29, 2026, unless otherwise stated. USD conversions are presented for ease of reference and may not fully match prevailing exchange rates.