China’s Crackdown on Futu & Tiger: What It Means for Millions of Investors I China Insights

Recently, stock prices for Futu and Taiga, popular Chinese trading apps, suddenly halved. The public wondered, was it fraud or did founders flee? Neither. Eight Chinese agencies, including the CSRC and Central Bank, cracked down on Futu, Taiga and Changqiao. Domestic and overseas illegal gains were seized and the companies faced fines exceeding 2.2 billion RMB. But that's just the start. More frightening than the CCP's massacre of these brokerages is that the US is legislating against all these CCP-controlled private Chinese stocks. They are being driven out of the US stock market, Beijing is blocking the road and the US is closing the door. Under this two-pronged attack, the personal assets of countless Chinese middle class families are about to face an unprecedented and most brutal wealth bloodbath. As long as you still have assets in mainland China, you must watch this episode to the end. In the second half of the program, I will discuss a detail about this financial siege that many people haven't mentioned. Moreover, the problems you are about to face are very serious. Welcome back. Today, I'll explain this massive financial crackdown and the fierce tug of war between the exodus of private assets and the CCP's efforts to shut the door. To truly grasp how ruthless this move is today, we first need to go back 18 years. The main character of our story is Li Hua. In the year 2000, Li Hua graduated from the computer science department and joined a then unknown small company, employee number 18. This company would later become the Chinese internet giant Tencent. As one of Tencent's original 18 R-hats, Li Hua was not only one of the earliest core developers of QQ, but also achieved financial freedom before the age of 30. But within Tencent, he wasn't considered particularly outstanding. Former colleagues recall that no one expected Li Hua after leaving the company to make such a big splash. In 2004, Tencent went public in Hong Kong and Li Hua received shares. From then on, he began his journey as a Hong Kong stock investor. But as he continued trading, he discovered an extremely frustrating problem. At that time, the Hong Kong stock trading platforms on the market had ugly interfaces, were sluggish to respond, and looked like products from the last century. For someone who had worked in product development for several years and had a professional obsession with user experience, using that kind of software was pure torture. So one day in 2011, he sent a WeChat message to a friend. He said, I'm planning to start a business in the securities trading field. The other person replied that it didn't sound very interesting. At most, it would just be about providing information or building a securities community to drive traffic, nothing particularly innovative. That person was Pony Ma, the founder of Tencent. Even though his boss wasn't optimistic, Li Hua still decided to go for it. In 2012, he led a group of Tencent's top tech talents and officially founded Futu Securities. At that time, there were already more than 400 traditional brokerage firms in Hong Kong. It was a fiercely competitive market. But who would have thought that this group of outsiders to the financial industry could, in just a few years, rely on an exceptional internet product experience to snatch the biggest share of the market from major and established brokerages, becoming the largest retail brokerage in Hong Kong. Around the same time, another person also noticed the same problem and had a similar idea. This person was Wu Tianhua, who earned both his bachelor's and master's degrees from Tsinghua University's Department of Computer Science. After graduating, he joined NetEase Yudao, where he worked for eight years and eventually became the head of search technology. What changed the course of his life was the stock options Wang Yi gave him when NetEase went public on Nasdaq. In order to understand these U.S. stocks he now owned, he dove head first into researching the U.S. stock market and soon earned his first pot of gold. He had exactly the same pain point as Li Hua. He wanted to seriously trade U.S. stocks but couldn't find a decent trading tool. In 2014, at the age of 30, Wu Tianhua left NetEase and founded Tiger Brokers. Looking back now, the list of investors he later brought in is truly dazzling. Wang Xing from Meituan, Lei Jun from Xiaomi, and even the Wall Street legend Jim Rogers. Have you noticed? The paths of these two people are almost identical. They are among the smartest engineers in China's internet industry, both possessing sharp product insight. So they used new internet technologies to transform an old and rigid traditional industry. They revamped it completely. So whose problems did their products actually solve? Let's move to 2018 and 2019. During that time, several things happened in China. The real estate bubble began to show and the myth of making easy money just by buying property was gone for good. The A-shares market kept falling, becoming widely recognised as a trap for retail investors. As for putting money in the bank, the interest rates couldn't even keep up with inflation. So the middle class, who had managed to save up some money, and the new rich from the internet industry, started to get anxious. The money they had worked so hard to earn needed to be put somewhere safe, but also somewhere it could grow. That's when Futu and Tiger appeared. Not only did they allow Chinese people to invest across borders in the booming US and Hong Kong stock markets, but more importantly, they made the interface extremely smooth, breaking down the professional barriers to financial investment. Opening an account was fast, and buying stocks was just one click away. For the vast number of Chinese users already accustomed to using WeChat and Alipay, the difficulty of cross-border investing was reduced to zero. Speaking of this, I'd like to ask everyone, have you ever had the experience of buying stocks through a cross-border brokerage? What kind of software did you use? Please let me know in the comments section, and let's take a look at what this market is like. If you're using either of these two apps, please also share any first-hand information you've received with everyone here. It's this kind of ultimate convenience combined with the allure of overseas markets that has directly triggered the explosive growth of Chinese investment in overseas assets. By 2020, just the Futu New New app alone had 517,000 clients with assets, and the total client assets reached $36.8 billion, which averages out to $71,200 per person. Pay attention to this number, over $71,000 per person. You should know that, according to the rules of the Chinese Communist Party, each Chinese citizen has an annual foreign exchange quota of only $50,000, and even this $50,000 is strictly prohibited from being used to buy stocks overseas. Yet in the personal accounts on Futu and Taiga, the average asset per person can reach $71,000, which clearly exceeds this limit. So how did the money get over there? This is the unspoken secret beneath the surface of this Noah's Ark. This money was either exchanged and sent out through underground channels in the early days, or it bypassed the CCP's scrutiny and flowed out. For the past few years, everyone tacitly agreed not to break this unspoken rule. But now, as the CCP is closing the door and cracking down every single cent in an ordinary Chinese person's account that exceeds the limit, becomes a huge hidden danger, a piece of incriminating evidence for the CCP to slowly strip away your assets. How should we understand this? This is the most insidious aspect of this financial crackdown, which we will discuss in detail later. So friends, make sure you pay attention to this detail. During those years, Futu and Taiga brokers reached the peak of their glory. In 2019, both companies went public on the Nasdaq in the United States, one after the other. Li Hua's net worth once soared to over 70 billion yuan, earning him a spot on the Hurun Rich list. By helping Chinese people move their money overseas, they became billionaires. So the ship was built, and the people had boarded, with the sails billowing to the fullest. But just as this was sailing at its fastest, a pair of eyes on the shore had already been watching it for a long time. There are two things that a centralised regime can least tolerate. One is thoughts that cannot be controlled, and the other is money that cannot be controlled. For controlling thoughts, the CCP has the Great Firewall, deletes posts, and bans accounts. This has been managed for decades. But when it comes to wealth flowing out of the country... Before 2021, the CCP would turn a blind eye to this. They thought that a few million members of the middle class moving some money abroad wouldn't shake the foundations. But the situation is changing. What about real estate? It has already completely collapsed. Local governments are heavily in debt, and foreign capital has withdrawn entirely. Suddenly, Beijing realised a problem. The money flowing out each year through channels like Futu and Taiga brokers is no longer just a few hundred million, but tens of billions, even hundreds of billions. When a centralised regime starts running short of money, the way it looks at its citizens' overseas assets changes completely. The first heavy blow came at the end of 2021. In December 2021, Reuters reported that the Chinese authorities were planning to ban online brokerages like Futu from providing overseas trading services to clients in mainland China. As soon as the news broke, Futu's stock price immediately dropped. But this was just a warning. The real tightening of the noose happened on December 30, 2022. On that day, according to the Wall Street Journal, the China Securities Regulatory Commission officially determined that Futu's act of providing overseas securities trading services to mainland clients was not in compliance with Chinese laws and regulations. With this single statement, the business was officially labelled as illegal. On the day the news was released, Futu's stock price plummeted 31% in a single day. After the official determination, the Securities Regulatory Commission issued its first order, no more soliciting new mainland clients, no opening of new accounts, struck hard by the iron fist. How did Lihua and Wutianhua react? What was their response? Of course, they didn't dare to go head to head. These two of China's smartest engineers made a decision that seemed extremely rational and pragmatic from a business perspective, that is, to kneel down and cooperate. In May 2023, Futu and Taiga removed their apps from mainland China. They cited an international focus on Singapore and the US, but internally admitted fault and quickly exited the mainland market. Over the next three years, they slashed marketing and promotions, stopped opening accounts for users with mainland identities and strengthened account verification. The proportion of deposits from mainland clients, which used to be the company's main source, was cut all the way down to just 13%. Taiga was even more ruthless, reducing it directly to 10%. They thought that as long they were obedient enough and made the reforms required by the party, the party would let them off, but clearly they weren't truly smart. This was a huge misjudgment. They used business logic from a normal society to try to figure out the political logic of an authoritarian society. China in 2020 was very different from China in 2022. The economic hole had bottomed out, and foreign exchange reserves were frequently under threat, for a regime that was desperately short of money to its very core. Every penny was a lifeline to keep its machinery running. It absolutely could not tolerate, while it was frantically plugging leaks, that there were still channels continuously funneling private wealth overseas. But even after Futu and Taiga brokers reduced their mainland business to just 10%, they still couldn't stop the frenzy of Chinese people moving their money abroad. The Wall Street Journal revealed a figure. In just the single year from 2023 to 2024, funds that flowed out of China and were classified by the CCP as illegal outflows reached as much as US$254 billion, shattering all historical records. And this happened even after Futu and Taiga brokers had already reduced their mainland business to 10%. Just imagine how massive the scale of Chinese capital outflows is. Then, on May 22nd of this year, the ultimate ironclad restriction came crashing down. This time, it was a comprehensive crackdown, led by the China Securities Regulatory Commission, and joined by the Ministry of Public Security, the People's Bank of China, and five other departments. This sweeping rectification plan was launched with special approval from the State Council. Look at this line-up. The CSRC handles investigations and blacklists, the Cyberspace Administration cleans info and shuts accounts, the MIIT removes apps, the SAMR targets illegal ads, and the PBOC and SAFE block cross-border flows and underground banks. The Ministry of Public Security is responsible for filing criminal cases, and local governments are in charge of implementation. This isn't just economic regulation. This is a comprehensive, all-encompassing net that covers everything from public opinion to capital, from sentencing to app removal. This is a financial crackdown akin to quitting an addiction, and that astronomical fine has completely torn away the sugar coating from their so-called law enforcement. It revealed their true intention of confiscating assets. Futu was fined 1.85 billion RMB, Tiger was hit with a heavy penalty and confiscation totaling over 410 million, and together with Changshao, the three institutions were fined more than 2.26 billion in a single day. And that's not all. Futu's Lihua and Tiger's Wutianhua were each personally hit with million-level fines and administrative warnings. As soon as this news broke, the scene we described at the beginning of the program played out. The stock prices of both companies were instantly cut in half. Wall Street once again experienced firsthand what it means to face the unpredictable political risks unique to the Chinese Communist Party. But do you think they are the biggest victims in this financial crackdown? No, no, no. They'll feel the pain, but they won't starve. The ones who might actually go hungry are ordinary Chinese middle-class people. What I'm about to discuss next is the most important and also the most overlooked detail in this financial crackdown. Friends, you really need to keep listening. The most terrifying detail in this financial crackdown is hidden in this implementation plan. There's a very subtle line, the China Securities Regulatory Commission has set a two-year period for concentrated rectification. Sounds gentle, right? Giving you two years to gradually clean things up. But the financial news outlet Kexin dug up the specifics of this regulation. And during these two years, mainland clients with existing accounts are prohibited from buying or transferring in funds. To put it in plain language, you can only sell, not buy. You can only take money out, not put money in. Let's talk about not being able to buy first. Suppose Xiaowei bought some US stocks on Futu two years ago, and now they're stuck down by 30%. Normally, he would have a lot of options. He could average down by buying more or even increase his position to bet on a rebound. But now, with the rule of no buying allowed, both of these options are completely blocked. All he can do is watch helplessly as this losing position sits in his account, unable to do anything about it. Then Xiaowei might think, fine, to prevent further losses, I'll just quit, sell all these stocks, and transfer the money back to China. At least, I'll secure what's left. But here lies the most insidious part of this whole scheme. This sum of money may not end up as Xiaowei wishes. As for transferring the money back to China, well, the first hurdle will be at the bank. This sum of money coming from an overseas securities account falls under the capital account category, and domestic banks won't just let it smoothly enter Xiaowei's account. They will need to review where this money came from, how it was transferred out in the first place, and whether it was legal. And here, this ties back to that huge hidden risk we mentioned earlier. This question hits right at the fatal weakness, because when this money was transferred out back then, much of it likely went through underground banks or various grey channels. Now, if you want to bring it back, you'll first have to clearly explain the origin and flow of these funds. If you can't give a clear explanation, at best, you'll be required to pay a hefty fine, and at worst, the money will be directly classified as illegal money laundering. It will be confiscated. So it's not that the CCP won't let the money come back. Rather, at the doorstep of returning home, under the guise of so-called compliance review, they want to take another big bite out of Xiaowei's share. As a result, these affected mainland middle-class individuals end up stuck in a deadlock. The money in their accounts can't be bought, can't be added to, and if they want to sell and leave, it will be difficult for the funds to return to China smoothly, leaving them caught in a dilemma. You might wonder, what is the CCP trying to achieve by doing this? Shouldn't they be beating drums and gongs to welcome everyone bringing their money back to China? What they want is to make an example out of someone to warn others. Think about it. If they let this money flow back to the mainland easily, what conclusion would the public draw? Oh, so it's fine to move money out, play around with it, make some profit, and then bring it back with no consequences. If this idea spreads, it would be like handing a free pass to everyone who still wants to move their money overseas. This is something the CCP absolutely cannot tolerate. What they want is exactly the opposite. They want the turmoil of these past two years to leave a deep scar on the psyche of every member of the middle class. Overseas assets are unsafe, they can be cut off at any time, and while money can go out, it might not be able to come back. He would rather let that money rot overseas than fail to engrave this fear into the bones of the Chinese people. He wants to make sure that from now on, Chinese people will never dare to even think about moving their money out again. Once the two-year period is up, he takes down the app, shuts down the website, and cuts off the servers. Chinese people inside the Great Firewall, holding only their mainland ID cards and without any foreign bank cards, are left with an account they can't even log into. Ah, the money in those accounts become zombie assets. After two years, where will these unclaimed and inaccessible funds end up? That's not something you or I will ever be able to see. This is the real core of this crackdown. He calls it helping the Chinese people and protecting investors' property. But in essence, he's declaring that your money only counts as money if it's within his line of sight and arranged according to his rules. As long as you dare to take it out, I'll make sure you can't bring it back. Or even if you do, you won't be able to get it or you'll suffer huge losses. So this is a collective harvesting of private enterprises, and even more so, a public execution of all Chinese middle class who have moved their money abroad. An absurd scene then unfolded. The afternoon the fine was issued, Tiger Brokers' Hong Kong branch issued a defiant response. Wang Shan, their COO, told media they noted the CSRC notice but emphasised it doesn't apply to their Hong Kong entity. As an independent entity licensed by the are regulated by Hong Kong law. And this time, back then, it caused quite a stir. Many investors felt as if they had found a lifeline and praised Tiger for its boldness, saying this was truly a test of the bottom line of Hong Kong's rule of law. Unfortunately, this show of backbone lasted only a few short hours. The next morning, Tiger issued a statement in a panic and every word was filled with a strong desire for self-preservation. They said that recent claims about Tiger refusing to cooperate or defying regulators were completely untrue, and they needed to make a serious clarification. They would strictly follow the guidance of the China Securities Regulatory Commission. Compliance comes first. You see, he's not actually refuting that unreasonable fine. He's refuting the idea that he might resist in any way. He's terrified that Big Brother might misunderstand and think he's even slightly defiant. So he rushed to come forward overnight to prove his innocence. I didn't fight back. I really didn't fight back. I'm kneeling in the most proper way. Please, you have to believe me. Look, a company registered in New Zealand, which should be protected by Western financial laws, was fined 400 million by the CCP. And the most urgent thing for them is actually to clarify, I really am obedient. I have to say, he has truly set a new standard for kneeling. Speaking of this, some friends might wonder, do Futu and Tiger really have no problems at all? That's not the point. The point is that around the world, normal governments simply don't manage their citizens' overseas investments in this way. In the United States and most Western countries, it is perfectly natural and a basic freedom for citizens to invest their legally earned and taxed money in any market around the world without needing anyone's approval. What the government regulates is whether the brokerage firms are licensed, whether there is any fraudulent activity, and whether your money is properly protected. They supervise whether the institutions treat you well, not whether your money is allowed to go abroad or where it goes. And they certainly don't force you to only sell or not sell. Looking back now, this was a long-planned hunt. From 2012 to 2021, two smart Chinese engineers built a Noah's Ark for overseas assets, and millions of Chinese middle-class people crowded aboard thinking they had found a safe haven. In 2022, Beijing tightened the first noose, labelling it illegal and issuing warnings. From 2023 to 2025, the two companies cooperated on their knees, continuously forcing Chinese passengers off the ship. They tried to bargain with the party for a chance to survive. In the end, this year, the ultimate iron fist came down. The CCP closed the door and beat the dog. Eight government departments joined forces, and not only were the companies raided and severely damaged, but ordinary Chinese users who remained on the ship were completely locked out. This blow cut off more than just a leg from the rich and the powerful. What was really cut off was the last illusion held by countless Chinese middle-class people, believing that as long as they were smart enough and obedient enough, they could find a way out within this system. But little did they know, the so-called way out was nothing more than a dead end drawn by Beijing. The so-called safe haven was just a piggy bank that hadn't yet been harvested. This matter, I think, is extremely important for anyone who still has assets in China. So if you've watched up to this point, please make sure to give me a like and feel free to share my program with all your friends. For those who haven't subscribed to ZhenGuanDian yet, you're welcome to subscribe. Here we often do 20 to 25 minute episodes in a watch to the end series format. If you enjoyed today's program, please also leave a comment and share your thoughts on this issue with me. That's all for today. See you tomorrow at the same time on ZhenGuanDian. Goodbye.