On May 22nd, the regulatory hammer finally fell heavily. The China Securities Regulatory Commission (CSRC) announced the confiscation of all illegal gains from three securities firms—Laoxhu, Futu, and Changqiao—both domestic and international. This isn’t just a fine; it marks the end of an era.

This incident further validates the law: The Ordinary Person’s Impossible Triangle: Ordinary people cannot have benefits without queuing up.

Underlying Logic

Many people view this as a compliance rectification, but I believe the deeper motivation lies in foreign exchange management and macro-economic control:

  1. This year, the RMB exchange rate has been appreciating, moving from 7.3 to 6.7. The same amount of RMB can now purchase more US dollars; this appreciation is causing an acceleration of capital outflow.
  2. US stocks have seen impressive growth in the past couple of years, leading more and more people to tout American equities, to the point where even people like Luo Tuoxiang are investing in every single stock.
  3. The intense appreciation of the exchange rate is damaging exports, so this situation must be reversed. The first step is to seal off the escape routes, and the next is to control the RMB’s depreciation.

Two Predictions

  • RMB Depreciation Expectation: As the channels are sealed off, the RMB exchange rate is highly likely to enter a ‘cooling phase,’ gradually returning to above 7.0, and potentially touching the 7.2 range.
  • The “Premium Era” of Domestic QDII: Since the direct path abroad has been welded shut, the only compliant window for domestic investors to allocate assets globally is through QDII (Qualified Domestic Institutional Investor). Against a backdrop of highly scarce quotas, the current 1%-4% domestic premium is just the beginning. Over the next half year, the premium rate for domestic QDII is likely to normalize and sustain itself between 5%-8%.

Conclusion

The market is the sole standard for verifying truth. When outstanding assets vanish, we are compelled to pay a higher premium just to snatch up the remaining ones.