Keep pulling the thread on Lulu Chen.
Chinese law technically prohibits citizens from buying and selling shares in foreign markets, with the exception of a few permitted channels.
Chinese regulators have given brokerages involved in illegal cross-border trading a two-year period to unwind all related client assets.
An estimated $807 billion in capital left China last year, the highest single-year outflow on record.
In late May, the China Securities Regulatory Commission and seven other government agencies announced a crackdown on illegal cross-border trading.
Chinese authorities will penalize brokerages Futu, Tiger Brokers, and Longbridge Securities for operating on the mainland without a license.
China has existing laws to tax its citizens' global income, including investment gains, but enforcement of these laws has only begun recently.
Tiger Brokers holds approximately $6 billion in assets from mainland Chinese clients, which accounts for about 25% of its revenue.
Futu holds approximately $26 billion in assets from mainland Chinese clients, which accounts for about 20% of its revenue.
China's property-related revenue for local governments has plunged 48% over the past five years.
Chinese tax authorities are retroactively applying taxes on overseas investment gains back to at least 2018.
Chinese citizens are required to pay a 20% tax on overseas investment gains in addition to a penalty fee for prior non-payment.
The Chinese government's crackdown on offshore trading aims to map the offshore wealth of its citizens and demonstrate its authority over those assets.