Two Paths for Mainland Chinese to Invest in US Stocks

Generally speaking, there are two paths for Mainland Chinese residents to invest in US stocks:

1. Hong Kong brokerage account.
2. US brokerage account.

However, Hong Kong brokerages have essentially no longer accepted new account applications from Mainland Chinese residents.

To open a Hong Kong brokerage account, Mainland residents now need both their ID and proof of overseas residence — this has effectively cut off new users from the Mainland. This was the path that 99% of Chinese people used to choose.

US brokerages, such as Interactive Brokers (IBKR), actually have a decent chance of approval nowadays. So if you have the need, going the US route is also viable — this is an example of information asymmetry.

Convenience and Information Asymmetry

Both paths face a fundamental problem: do ordinary people really understand all of this?

How many people actually understand funds? How many have securities accounts? How many don’t even know that stocks can be sold short?

I work at a large internet company with over 10,000 employees. Many people here invest in stocks, but very few have Hong Kong brokerage accounts. Everyone knows Alibaba, but far fewer actually hold Alibaba shares — because buying Hong Kong stocks through A-shares requires opening a Stock Connect account (港股通, a channel for Mainland investors to trade Hong Kong stocks), with a requirement of 20-day average assets of 500,000 RMB. How many retail investors have hundreds of thousands of yuan for stock trading?

Most Chinese users on Twitter have already developed strong information retrieval skills. So why do domestic Nasdaq ETF recommendation posts spread so virally on Twitter?

This proves that even in this high-quality Chinese-speaking community like Twitter, not that many people have convenient access to invest in US stocks. Most still buy domestic ETFs instead.

For myself, I have three Hong Kong brokerage accounts and one US brokerage account — yet I still regularly use my domestic securities account for ETF recurring investments.

So I think this is fundamentally a problem of convenience and information asymmetry.

The Truth About QDII Quotas

As for QDII quotas dropping sharply — this happens regularly. Fund companies don’t have unlimited foreign exchange quotas. When they see too many people buying, they immediately reduce the quotas.

Before Hong Kong account opening was blocked, QDII funds were frequently capped at 100 (units per investor).

Recently, a new wave of people on Douyin and Xiaohongshu started showing off their returns on S&P 500 and Nasdaq investments. This brought these two indexes to more people’s attention, and massive buying followed — it’s completely normal for QDII quotas to become insufficient.

Fund companies earn management fees. The more you buy, the more they earn. They have absolutely no reason to block your investment channel.

How to Bypass the Quota

Bypassing this quota is actually quite simple: buy ETFs on the secondary market. Currently, the E Fund Nasdaq ETF (易方达纳指, a major Chinese fund manager’s Nasdaq product) premium is around 4.5% — this price is perfectly acceptable.

Many people fear this premium, but it’s not a short-term phenomenon — it’s been persistently present. At its peak, it reached a 25% premium.

Let me give a very simple example to illustrate. ICBC (Industrial and Commercial Bank of China) is listed on both the A-share and Hong Kong markets, with its premium consistently above 25%, recently reaching 35%. Does this mean that everyone who bought ICBC stocks on the A-share market over all these years was a fool?