Beijing tightens control over outbound investment

A new State Council administrative regulation is the first in the People’s Republic of China (PRC) to govern outbound investment as a whole. It defines “resident individuals” as outbound investors for the first time, subjecting private overseas investment to the approval, reporting, security-review, and penalty framework that previously only encompassed enterprises.

The regulation arrived amid an escalating campaign against the offshore brokers through which mainland households bought U.S. stocks. This has led to penalties against the firms Futu, Tiger, and Longbridge in May, and an eight-department plan imposing a two-year, sell-only wind-down of existing mainland accounts.

The regulation includes a national security review mechanism that applies not only to new investments but to the transfer, disposal, and offshore reinvestment of assets already held. But implementing rules that would let holders file or regularize are yet to be issued.

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