Chinese regulators slap US$7.8m penalty on Guotai Haitong arm amid capital flow crackdown
An asset-management arm of Guotai Haitong Securities, a leading Chinese brokerage, was ordered to pay 52.5 million yuan (US$7.8 million) in fines and penalties for activities undertaken by its offshore investment business as Beijing tightens its scrutiny of capital flows. Guotai Haitong Securities Asset Management was fined 25.9 million yuan and ordered to forfeit 26.7 million yuan in illegal…
Chinese regulators have imposed a fine of US$7.8 million on Guotai Haitong Securities Asset Management, a brokerage's asset-management arm, for violations in its offshore investment business. The penalties, totaling 52.5 million yuan, were enforced as Beijing intensifies its control over capital flows. Guotai Haitong was fined 25.9 million yuan and required to surrender 26.7 million yuan in illicit profits for breaching foreign-exchange rules governing the Qualified Domestic Institutional Investor (QDII) program and failing to report cross-border transactions accurately.
The decision was announced by the State Administration of Foreign Exchange (SAFE) on the Shanghai branch’s website, though specific details about the transactions involved were not disclosed. Guotai Haitong did not provide immediate comment on the matter. The Qualified Domestic Institutional Investor (QDII) program enables Chinese financial institutions to raise domestic funds and invest in overseas securities within regulated quotas.
The violations were found in several QDII products offered between 2019 and 2022, which have since been rectified, the company stated in its interim report. Despite the penalties, Guotai Haitong assured that the fine would not impact its current QDII qualification or regular operations. China has been tightening its scrutiny over cross-border capital flows and offshore wealth while simultaneously broadening official avenues for mainland Chinese residents to invest overseas.
Recently, Beijing introduced new rules imposing taxes on assets transferred into offshore trusts and income generated by them, alongside intensifying tax enforcement on income from offshore insurance policies. The QDII program remains a sanctioned route for Chinese capital to access overseas markets. SAFE reported issuing US$176.2 billion in QDII quotas to 193 institutions as of the end of June, a rise of US$5.3 billion compared to the previous year.
The regulator has indicated that future quota allocations will prioritize institutions with robust investment capabilities, popular products, high compliance standards, and effective management.
Written by urgent.news from Reuters Business via SCMP's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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