Why is it illegal to buy foreign stocks with one's own money in China? I thought I had explained it very clearly, but there were still many friends who were very interested in this topic and had a great time discussing it. In fact, this proposition itself is wrong. There has never been a ban on buying foreign stocks in China, and buying foreign stocks is not illegal. This is a fact. For example, QDII, Hong Kong Stock Connect, Cross border Wealth Management Connect, Employee Stock Ownership Plan or Option Plan are all legal. Moreover, the documents from the State Administration of Foreign Exchange clearly state that domestic individuals can make overseas fixed income, equity and other financial investments through qualified domestic institutional investors such as banks and fund management companies through QDII. Employee shareholding and stock options can also be applied for and processed by companies or domestic agencies through the State Administration of Foreign Exchange. So it is legal for individuals to hold or purchase overseas stocks in China. But this sentence requires a prerequisite that it must be purchased through a legally recognized overseas investment channel recognized by the Chinese government. Of course, even if it is purchased through illegal means now, the Chinese government has never expressed the intention to confiscate personal assets. (Of course, the premise is that the source of funds for purchasing stocks is legal) So where does the problem lie? But the problem is that China has not opened up channels for individuals within the country to freely exchange foreign exchange and directly buy foreign stocks at overseas securities firms. The fundamental reason is that China implements capital account controls, and the RMB is not yet a fully convertible currency under the capital account. This one needs to be remembered!! Why can't the Chinese yuan be freely exchanged? Mainly to prevent large-scale capital outflows. If a population of 1.4 billion can freely exchange RMB for US dollars to buy US stocks, bonds, and overseas properties, the RMB exchange rate, foreign exchange reserves, and liquidity of the banking system will all be under pressure. If given the freedom to choose, would you choose Chinese yuan or US dollars? Of course, some friends may ask why the United States or Europe can freely exchange without any problem? Because Europe and America have chosen a different financial system. The capital account is basically open, the exchange rate is market-oriented, the degree of currency internationalization is high, and risks are managed through taxation, anti money laundering, sanctions, securities supervision, and information declaration. China restricts the free exchange of capital accounts. Most countries in the United States and Europe have already completed capital account liberalization, allowing residents to exchange their local currency for foreign currency and buy foreign stocks, bonds, funds, and real estate, provided that the source of funds is legal, tax declaration is compliant, and sanctions and anti money laundering rules cannot be violated. The core is that the United States and the eurozone can afford free capital flow, and China does not want to bear this cost now. Because there is an impossible triangle in international finance, a country cannot simultaneously have a fixed or strongly managed exchange rate, free capital flow, and independent monetary policy. You can only choose two out of three at most. Why can the United States? Because the US dollar is a global reserve currency, the United States does not need to worry about its currency being suddenly sold out and its foreign exchange reserves being depleted like emerging markets. Capital outflows from the United States often end up flowing back into US dollar assets, and the US dollar system itself is a reservoir of global funds. Why is Europe also relatively good? Because the euro is also a major international currency, the free flow of capital within the EU is part of financial integration, and member states have relatively mature systems for financial regulation, tax information exchange, and anti money laundering. Why is China different? China is not willing to allow residents, businesses, and financial institutions to convert RMB into US dollar assets on a large scale at any time. Otherwise, several problems may arise: Firstly, the pressure on the RMB exchange rate will increase. If residents and businesses can freely exchange US dollars to buy US stocks, US bonds, and overseas properties, once the expectation of RMB depreciation is formed, funds will be concentrated abroad, and the central bank will have to consume foreign exchange reserves to stabilize the exchange rate. Secondly, domestic liquidity will be drained. China hopes that savings will remain in the domestic banking system, bond market, real estate market, A-share market, and physical financing system. If the capital account is fully opened up, residents may directly transfer their money to US assets, which will have an impact on domestic asset pricing and financing environment. Thirdly, the independence of monetary policy will be weakened. If capital flows completely freely and the People's Bank of China cuts interest rates, funds may flow out. US interest rates are higher, and funds may buy US dollar assets. In this way, China's own interest rate policy will be led by the Federal Reserve. Fourthly, the difficulty of regulatory and tax penetration will increase. If individuals go directly to overseas securities firms to buy stocks, funds, insurance, and real estate, without a sound system for declaration, taxation, anti money laundering, and accountability, it is difficult for regulators to determine the source of funds, income attribution, and tax responsibility. So the core issue is still that China needs to maintain the stability of the RMB exchange rate, foreign exchange reserves, independent monetary policy, and domestic capital pool, so it is necessary to control the currency. Bitget is here, VIP! Crypto、 US shares CFD， Global Advantage One Stop Layout