Insiders in mainland China are pretending to be foreign investors to trade their own stocks without being caught by regulators.
April 23, 2026
Original Paper
Homemade Foreign Trading
SSRN · 6610758
The Takeaway
A strategy known as round-tripping allows local executives to disguise their trades using the Stock Connect program. By moving money through Hong Kong, they create a financial camouflage that makes their activity look like international investment. Most regulators assume that foreign investment is a sign of global confidence in a local market. This research reveals that much of this activity is actually insiders evading surveillance to manipulate their own company prices. It shows how easily global financial structures can be used to hide local corruption.
From the abstract
Using cross-border holding data from all custodians in China’s Stock Connect, we provide evidence that Chinese mainland insiders evade see-through surveillance by round-tripping via the program. Following the 2018 Northbound Investor Identification reform, the return predictability of northbound flows decays, as does their correlation with insider trading. This reduction is especially pronounced among less prestigious foreign custodians and cross-operating mainland custodians, where insiders are