Security Fears Reshape Capital Flows as SpaceX Sidelines Chinese Investments

US company's curbs on Chinese investment and Beijing’s capital controls point to a widening economic divide.

Published: 6/12/2026, 3:39:30 PM EDT

Security Fears Reshape Capital Flows as SpaceX Sidelines Chinese Investments — A SpaceX Falcon 9 rocket at a SpaceX facility in Hawthorne, Calif., on April 2, 2026. (Mario Tama/Getty Images)

The world's richest man, Elon Musk, saw his aerospace company, SpaceX, officially list on the stock market on Friday (June 12).

Just a day prior, SpaceX completed the largest initial public offering (IPO) in history, raising a record-breaking $750 billion. However, notably absent from this group are investors from China and Hong Kong.

Bloomberg first reported last Friday that SpaceX has decided on this ban and justified the decision on national security grounds.

According to sources with knowledge of the matter, the company alleged that allowing Chinese investors to buy its shares would put it in the crosshairs of the U.S. International Traffic in Arms Regulations (ITAR), which govern trade in sensitive aerospace and defense technology.

As a key defense contractor, SpaceX is deeply embedded in U.S. military and intelligence infrastructure. It secures billions in contracts from the DoD and the National Reconnaissance Office (NRO), frequently serving as the exclusive provider of critical aerospace technology and services.

People based in Hong Kong or China trying to sign up to buy shares through the official SpaceX site were met with an “Error 1009” message, Reuters said.

OpenAI, another leading U.S. artificial intelligence company, will reportedly impose the same restrictions when it goes public later this year. Sources reveal that the company had already barred Chinese investors from participating in its previous private funding rounds.

This has fueled concerns over an accelerating decoupling between the United States and China.

Pressure From Washington

In recent years, U.S. tech and AI firms have grown increasingly cautious about accepting capital from Chinese investors—a shift that reflects a powerful backlash within the American political ecosystem against Chinese investment infiltrating sensitive technology sectors.

On Feb. 5, Sens. Elizabeth Warren (D-Mass.) and Andy Kim (D-N.J.) sent a letter to Defense Secretary Pete Hegseth, demanding a national security review into SpaceX.

The move follows previous reports that Chinese-linked investors have been shifting funds through Caribbean entities to bypass SpaceX’s background checks and secretly acquire shares in the rocket manufacturer.

In their letter, the senators warned that these financial ties could present a severe national security threat, risking the safety of critical military, intelligence, and civilian infrastructure, and being “at odds with the administration’s policies on foreign investment from countries of concern in strategic industries.”

They expressed deep concern that Chinese investors might gain backdoor access to proprietary, nonpublic data—specifically sensitive details regarding SpaceX's government contracts and supply chain logistics. Allowing this information and technology to fall into China's hands could “undermine U.S. national security.”

China Suppresses Domestic Outflow

On the other side of the equation, Beijing has intensified its efforts to block citizens from investing in American equities, launching a sweeping crackdown on cross-border stock trading since May.

In late May, the Chinese Communist Party (CCP) accused Futu Securities and Longbridge Securities from Hong Kong, alongside Singapore's Tiger Brokers—the three largest and most active brokerages in the space—of operating without licenses in China. The state imposed fines exceeding $325 million and confiscated their assets.

Many Chinese investors had relied on these three cross-border brokerages to open Hong Kong brokerage accounts, purchase U.S. stocks, and trade options. Under the new regulatory ban, however, existing clients are subject to a strict "sell-only, no-buy" restriction.

Furthermore, new sweeping State Council regulations on outbound investment are set to take effect on July 1.

Compared to previous policy documents, the scope of this new crackdown has expanded dramatically to target investors, technology, and data transfer. For the first time, direct overseas investments by Chinese individuals will be placed under strict state surveillance.

According to Chinese media reports, over the past two weeks, the short-video platform Douyin (China's TikTok) has removed more than 1,500 videos related to cross-border investing. The deleted content primarily consisted of tutorials teaching Chinese users how to open Hong Kong bank accounts and securities portfolios.

Dr. Frank Tian Xie, a professor at the University of South Carolina Aiken School of Business, told the Chinese Edition of NTD: "The Chinese economy continues to deteriorate, and China's financial markets are heading toward a collapse. Out of sheer panic and fear, the CCP is locking down this capital, banning regular Chinese citizens and domestic investors from participating in global markets."

"In other countries, how you invest the money you earn is entirely your own right. But Chinese citizens simply do not have that right," Xie added.