This post is a concise and comprehensive guide to the nomenclature of Chinese share classes.
Broadly speaking, Chinese shares can be broken down into two types:
Companies that are incorporated within mainland China
Companies that are incorporated outside of mainland China (e.g. the Cayman Islands or the British Virgin Islands) but are established in and originate from China
We discuss the individual share classes below.
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Companies Incorporated Within China
There are three types of shares for companies that are incorporated within China:
A-Share
Shares of Chinese-incorporated companies that trade on mainland Chinese stock exchanges (i.e. the Shanghai Stock Exchange or the Shenzhen Stock Exchange)
Trading currency is RMB
Foreigners can buy A-shares under the Qualified Foreign Institutional Investor (QFII) program, the Renminbi Qualified Foreign Institutional Investor (RQFII) program, or the Stock Connect program
Additional Information
Please refer here for further explanations of these mechanisms.
B-Share
Shares of Chinese-incorporated companies that trade on mainland Chinese stock exchanges (i.e. the Shanghai Stock Exchange or the Shenzhen Stock Exchange)
Trading currency is US dollars on the Shanghai Stock Exchange and Hong Kong Dollars on the Shenzhen Stock Exchange
Foreigns can trade by opening an account at the exchange
Additional Information
B-shares were founded in 1992 for stocks that are denominated in RMB but traded in non-RMB currencies. Once foreign investors deposit their non-yuan money into an account opened at the exchange, the money will be exchanged on-shore and then invested in B-shares.
Before 2001, only foreign investors were allowed to invest in B-shares. As a result of this policy, not many strong companies chose to issue B-shares since there were fewer investors, and since not many strong companies issued B-shares, not many investors invested in B-shares either.
After the QFII program was launched in 2003, B-shares became even less attractive, and liquidity became a significant problem. Companies that had both A-shares and B-shares could see their B-shares trading at prices that were 50% lower than their A-share counterparts due to the presence of an illiquidity discount.
Moreover, Chinese companies that target foreign investors generally tended to list directly in the US or Hong Kong, rather than issuing B-shares in mainland China.
H-Share
Shares of Chinese-incorporated companies that trade on the Hong Kong Stock Exchange.
Traded in Hong Kong dollars
Can be traded in the same way as any other stock on the Hong Kong Stock Exchange
Additional Information
For a given dual-listed company, A-shares and H-shares tend to trade with a price difference. We discuss this in an article coming soon.
Companies Incorporated Outside China
There are four types of shares for Chinese companies that are incorporated outside of mainland China.
Red Chip
Shares of non-Chinese incorporated companies that are substantially owned by mainland China state entitites with the majority of its revenue or assets derived from mainland China.
Shares are listed on the Hong Kong Stock Exchange
Can be traded in the same way as any other stock on the Hong Kong Stock Exchange
P Chip
Shares of non-Chinese incorporated companies established and originated in mainland China that are controlled by mainland Chinese companies or individuals.
Shares are listed on the Hong Kong Stock Exchange
Can be traded in the same way as any other stock on the Hong Kong Stock Exchange
S Chip
Shares of non-Chinese incorporated companies established and originated in mainland China, that are controlled by mainland Chinese companies or individuals.
Shares are listed on the Singapore Stock Exchange
Can be traded in the same way as any other stock on the Singapore Stock Exchange
N-Share
Shares of non-Chinese incorporated companies established and originated in mainland China, that are controlled by mainland Chinese companies or individuals.
Shares are listed on the New York Stock Exchange or NASDAQ
Can be traded in the same way as any other stock on these two exchanges
Additional Information
Investing in China (Equity):
Investing in China (Bonds):
The Future of Chinese Economic and Financial Policies:
Glossary of All China-Related Terminology:
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