Shares of Chinese carmakers fell in US pre-market trading on Friday, caught in a broad decline across US-listed Chinese stocks after Beijing escalated a crackdown on the offshore brokers that channel mainland money into those shares.
As of press time, Nio was falling 6.08% and Li Auto 5.37%, while shares of the Guangzhou-based automaker XPeng were declining by more than 2%.
The selling spread across the sector after China’s securities regulator moved to confiscate the profits of three brokers that served mainland investors without a license, and unveiled a two-year plan to shut down illegal cross-border trading entirely.
The brokers themselves bore the brunt.
Futu Holdings crashed by nearly 38% and UP Fintech Holding, the operator of Tiger Brokers, was plunging 36.64%, both as of publication time.
The damage to the EV names was milder but real, reflecting their heavy ownership among the mainland retail investors who trade US-listed shares through the targeted platforms.
Why the EV Stocks Are Exposed
Nio, XPeng and Li Auto are among the most actively traded Chinese names on US exchanges, and a meaningful share of that demand has historically come from mainland retail investors using offshore brokers such as Futu and Tiger Brokers.
The crackdown threatens to wind down that channel over two years, removing a source of buying for the stocks even though it does not touch the companies’ operations, listings or US filings.
The EV names and the large-cap technology stocks all fell, but none approached the brokers’ losses.
Pinduoduo fell 4.35%, Alibaba 3.66%, JD.com 3.40% and Baidu 2.59%.
All figures are pre-market moves as of publication time, measured against Thursday’s closing prices.
Nio and Li Auto fell more than the big technology names, while XPeng fell less.
For Nio, the slide compounded a complex week.
The stock had already reversed sharply during Thursday’s earnings call after management warned of rising raw-material costs, despite a record first quarter and a return to adjusted profitability.
The Enforcement Action
The China Securities Regulatory Commission said it had opened cases and issued advance notice of administrative penalties against domestic and overseas entities tied to Tiger Brokers (NZ) Limited, Futu Securities International (Hong Kong) and Longbridge Securities (Hong Kong).
The regulator said the firms conducted securities marketing, processed trading orders and earned revenue in China without brokerage or margin-trading licenses, violating Article 120 of the Securities Law and constituting the illegal operation of a securities business.
It said the firms also breached fund and futures statutes, amounting to the illegal sale of public funds and illegal futures brokerage.
The CSRC said it intends to confiscate all illegal gains and impose severe penalties, with the parties retaining rights to defend themselves and request a hearing.
The penalty action targets specific operating subsidiaries, while the market reaction landed on the US-listed parents, Futu Holdings and UP Fintech Holding.
Longbridge is not listed in the US.
A Two-Year Wind-Down
Separately, eight Chinese government bodies jointly issued a rectification plan, approved by the State Council, to ban illegal cross-border activity over a concentrated two-year period.
The agencies are the CSRC, the Ministry of Industry and Information Technology, the Ministry of Public Security, the People’s Bank of China, the State Administration for Market Regulation, the National Financial Regulatory Administration, the Cyberspace Administration of China and the State Administration of Foreign Exchange.
The plan targets overseas institutions that provide securities, futures and fund services to mainland investors without a domestic license, along with the domestic affiliates, intermediaries and online platforms that assist them.
Those institutions will now be banned from marketing and soliciting business in China, opening accounts, processing trading orders and transferring funds inbound for mainland investors.
The plan also forbids domestic platforms from providing account-opening channels or marketing for the overseas firms, and bars self-media accounts from posting promotional content that steers investors toward them.
During the two-year window, existing mainland clients may only sell positions and transfer funds out, with no new purchases or inbound deposits permitted.
After that period, the overseas institutions must shut down their domestic-facing websites, trading software and supporting servers.
The CSRC described the campaign as a more comprehensive, full-chain version of an effort that began on December 30, 2022, when it first ordered overseas brokers to stop soliciting mainland investors.
In 2023, Futu and UP Fintech removed their apps from mainland app stores to comply.
How the Campaign Will Work
The plan assigns enforcement roles across the eight agencies, with the CSRC leading the overall effort.
The regulator said it would build and continuously update a list of overseas institutions deemed to be operating illegally, and establish real-time monitoring of related online information through a standing mechanism with the cyberspace authorities.
The Cyberspace Administration is tasked with cleaning up offending content and accounts, while telecommunications authorities will remove or shut down the websites and apps that overseas brokers use, based on lists supplied by financial regulators.
The CSRC and other bodies will summon the overseas institutions and their domestic partners, requiring them to draw up rectification plans with concrete steps and timelines for ceasing the illegal business.
The Ministry of Public Security will work with the CSRC to investigate entities suspected of crimes, while local governments handle the closure of illegal operations and the revocation of business licenses.
On the money trail, the National Financial Regulatory Administration will summon domestic banks that provide account services for the illegal cross-border investing, and the State Administration of Foreign Exchange will tighten compliance checks on outbound currency transfers and help crack down on underground banks used to move funds offshore.
Investor Protections
The CSRC stressed that the campaign is designed to protect investors rather than penalize them, and that client asset safety would not be affected.
Investors who trade offshore through illegal channels have little recourse under domestic law when disputes or losses arise, according to the CSRC.
The regulator said the phased two-year wind-down would give investors time to adjust, and that overseas institutions must communicate with affected clients and arrange for the safe handling of their accounts.
CSRC urged investors toward legal channels for offshore exposure, naming Stock Connect, the Qualified Domestic Institutional Investor program and the Cross-Boundary Wealth Management Connect scheme.
The regulator said it would coordinate with overseas financial authorities to press the foreign institutions to comply and to protect mainland investors’ assets and handle complaints.
The CSRC said the action was a warning meant to deter through individual cases, pledging to firmly contain the risks of illegal cross-border financial activity.
