Chinese Brokerages Tighten Leverage Scrutiny as Margin Balance Retreats from ¥3 Trillion
Alina Collins
CITIC Securities, East Money and other major brokerages have sharply raised the bar for margin trading — China's outstanding margin balance has dropped from a late-June peak above ¥3 trillion to ¥2.6 trillion, signaling a regulatory-driven deleveraging test for the market.
What exactly are brokerages tightening?
CITIC Securities (中信证券), East Money (东方财富) and peers have raised compliance thresholds for margin financing, securities lending, and options trading simultaneously.
New account holders must pass stricter checks on financial standing, trading experience, and risk tolerance.
Some firms now bar further borrowing by investors who opened accounts in the past six months or who have received frequent margin calls — a supplement notification asking a borrower to add cash or sell holdings to cover losses.
This means → brokerages are not issuing vague risk warnings; they are cutting off the leverage channel for the highest-risk accounts.
How big did the leverage build-up get?
China's outstanding margin balance topped ¥3 trillion in late June, then fell to ¥2.6 trillion (≈$362 billion) by end-July — a drop of roughly ¥400 billion in one month.
In the first half of the year, investors opened 960,700 new margin accounts, up 60% year-on-year; June alone added 179,000, up 77%.
In plain terms = nearly a million people rushed to borrow money to trade stocks in just six months, with June looking like a sprint to the finish line — leverage was expanding far faster than the market itself was rising.
How much did brokerages earn from all this leverage?
CICC estimates that 42 listed brokerages posted combined net profit of ¥142.5 billion in H1, up 50% year-on-year.
CITIC Securities' H1 net profit rose 69.6% to a record high; Guotai Junan expects profit growth of 27–30%.
This means → brokerages were the most direct beneficiaries of the leverage boom — more lending equals more interest and commission income. Tightening access amounts to voluntarily cooling their most profitable business line.
How has the market reacted?
A-share daily turnover has fallen from nearly ¥4 trillion in late June to below ¥3 trillion in recent weeks.
The CSI 300 pulled back after touching its highest level since late 2021; the ChiNext and STAR 50 indices both fell more than 20% in July.
This reflects a transmission chain: margin-fund retreat → lower turnover → sharper price declines in small- and mid-cap stocks.
What is Beijing's policy stance?
The CPC Politburo met in late July, with senior leaders pledging to boost investor confidence and strengthen market resilience.
The current policy line: promote long-term capital-market development while curbing speculative behavior — neither letting leverage spiral nor crushing the market outright.
Wang Chen, partner at Xufund Investment Management, said: "Excessive concentration of leverage in certain areas has heightened market instability. Although risks have eased somewhat, they may not be fully digested."
In plain terms = whether margin balances stabilize under the new thresholds is the key test of this regulatory brake — stabilization would mean a soft landing; continued rapid decline would suggest the deleveraging has overshot.
Content is for reference only, not financial advice.