China has banned brokers from opening overseas trading accounts for local investors

People cross a street in the technology district of Shenzhen, China September 14, 2015.

REUTERS/Bobby Yip

• China has banned brokers from opening overseas trading accounts, the Financial Times reported.
• Chinese regulators ordered brokerages to shut down "new account opening channels for domestic investors."
• Foreign investors have dumped Chinese stocks at a faster clip this year amid economic troubles. 

Chinese regulators have banned brokerage firms from opening overseas trading accounts for local investors, according to a report from The Financial Times. 

In a September 28 memo reviewed by the FT, China's Securities Regulatory Commission told Chinese brokerages they had to "close all new account opening channels for domestic investors" looking to buy into offshore markets. 

The regulator asked brokers to stop offering services to local and overseas investors, and that "opening overseas fund accounts for domestic investors is prohibited."

Meanwhile, a state-backed fund on Wednesday raised its stake in China's four largest banks, and the move helped lift the broader market and Chinese bank stocks. China's benchmark CSI 300 Index climbed roughly 0.95% in Thursday trading.

Sentiment more broadly has remained lukewarm this year, with foreign investors driving outflows from Chinese markets and dragging on the yuan. Overseas investors have sold Chinese equities at a record pace in 2023. And, wealthier Chinese citizen are also trying to move more cash out of the country, sometimes via an illicit network of underground money handlers. 

The world's second-largest economy has struggled through 2023, with little sign so far of the hotly anticipated post-pandemic rebound. Weak consumer demand, an ailing property sector, and a soft growth outlook all present headwinds for Beijing, and experts have even floated the possibility of a "Lehman moment."

Nicholas Spiro, a partner at Lauressa Advisory, told Insider in a recent interview that it's unlikely China can return to its boom-times of decades past. 

"There isn't going to be a sudden sharp shock or dramatic loss of confidence or financial stability," he said. "Rather, it'll be a slow-moving, structural economic crisis that could last for years. We are seeing a deep-seated, economic malaise which will be very prolonged."

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