China has started to tax offshore trusts as used by wealthy HNW citizens. There are limits to globalisation of finance and flows of investments, with an impact on other financial centres in Asia and wider world. 

The regulatory action against Futu Holdings and its peers in China is an example of how the country’s clampdown on HNW individuals using offshore channels is having an effect, the Wall Street Journal reported at the weekend.

An 9 August the WSJ report about Futu and its founder Leaf Li said his business, which is parent of financial services firm Moomoo and others, has been affected by Beijing tightening rules on those using offshore routes. Beijing now imposes a 20 per cent tax on offshore trust income and is bringing overseas insurance payouts into the taxable net. 

In late July, China confirmed that it would tax offshore trusts of the sort that had been used by wealthy Chinese to place assets outside the country.

Chinese controls on the use of offshore centres might affect Hong Kong’s cross-border prowess and its IPO market. The city, now part of China, but retaining elements of legal autonomy and its own currency, has overtaken Switzerland as the world’s largest cross-border financial centre, according to Boston Consulting Group. More than half a decade ago, the rise of the Wealth Connect system, linking stock market investors in Hong Kong, the mainland and Macao, was seen as an important driver of integration.

Hong Kong has also seen a rise in IPOs since the end of pandemic lockdowns. Wealth industry figures tell this news service that Hong Kong has regained much of its business vigour. However, a 23 June Bloomberg article said offshore capital constraints might cool what has been a busy IPO market or force it to find new channels.

There are reasons for caution on how effective clampdowns may be. Instead of deterring outflows, reports (Bloomberg, others) say the crackdown is accelerating emigration inquiries in China, benefiting overseas financial centres.

Penalties
Authorities in May handed Nasdaq-listed Futu a $271 million penalty for offering brokerage services and mutual funds to customers in mainland China without a licence. Beijing also fined Tiger Brokers, and Longbridge Securities, media reports said. Futu Holdings reports second-quarter 2026 financial results on 20 August.

The WSJ said China technically bans its citizens from investing overseas in stocks and real estate without government approval. But over the past decade, individuals have established trading accounts with Futu and its peers via websites in Hong Kong or in person in the city, the newspaper said, citing Chinese state media.

On 22 May, Futu announced in a statement that the China Securities Regulatory Commission said that certain Futu entities in the mainland and Hong Kong had conducted securities business, public fund sales business and futures business without the necessary licences. It was fined about RMB1.85 billion (around $275 million) and Li was fined about RMB1.25 million (around $183,000).

At the end of the first quarter of this year, funded accounts from mainland China accounted for about 13 per cent of all funded accounts at Futu, it said. 

This news service has contacted Futu Holdings for comment about the WSJ article and may update this in due course. 

On 2 June Futu said that Standard & Poor’s [now S&P Global], the ratings agency, maintained a stable outlook on the business and reaffirmed its BBB- long-term credit ratings.