H-Shares vs. A-Shares in China

H-Shares vs. A-Shares in China

5 Min.


A-shares refer to shares of companies based in mainland China that are listed on the Shanghai or Shenzhen stock exchanges. These shares are typically only accessible for trading to mainland Chinese citizens. In contrast, H-shares of Chinese companies that are listed on the Hong Kong Stock Exchange have a face value of Hong Kong dollars and can be traded by all investors.

H-Shares vs. A-Shares

Investing in Chinese publicly traded companies is a nuanced process compared to the straightforward approach in the United States. Unlike the U.S., where publicly traded stocks are accessible to anyone with funds, Chinese stock markets impose stringent restrictions on investors. Familiarizing yourself with these distinctions is essential if you intend to trade or invest in China.

Chinese publicly traded companies are generally categorized into three types of shares:

  1. A-shares represent Chinese companies listed on domestic stock exchanges like the Shanghai and Shenzhen Stock Exchanges. A-shares are denominated in yuan renminbi (CNY).
  2. B-shares are known as Domestically Listed Foreign Investment Shares and are listed on the Shanghai and Shenzhen stock exchanges. B-shares are traded in foreign currencies.
  3. H-shares are traded on Hong Kong's stock exchanges, subject to Chinese regulations, and are freely tradable by any investor. H-shares are traded using the Hong Kong dollar (HKD).

While all three share types may have renminbi denominations, they trade in different currencies depending on where they are listed. Understanding these nuances is crucial when navigating the Chinese stock markets.

A-Shares: Access and Opportunities

A-shares, representing mainland Chinese companies listed on either the Shanghai or Shenzhen stock exchanges, primarily cater to mainland Chinese citizens for trading. Nevertheless, foreign investment in these firms is feasible under-regulated structures. A subset of institutional investors, recognized as Qualified Foreign Institutional Investors (QFIIs) or participants in stringent trading programs, gains access to A-shares. The QFII designation is only granted to a limited cadre of institutional investors, entitling them to buy and sell Chinese A-shares.

Post-2007, Chinese mainland investors gained the option to purchase either A-shares or H-shares of companies listed on the Shanghai Stock Exchange. Before this development, Chinese mainland investors were limited to A-shares despite H-shares being available. Due to the accessibility of H-shares to foreign investors, they exhibit greater liquidity than A-shares.

A-shares, issued under Chinese law, are quoted in Chinese yuan or renminbi. For American investors lacking QFII qualification, accessing these shares typically involves investment via emerging market funds or American depositary receipts (ADRs).

MSCI Emerging Markets Index: Inclusion of A-Shares

Significant efforts have been invested in enhancing opportunities for foreign individual investors to trade A-shares. Investment avenues include exchange-traded funds (ETFs) and other funds that incorporate A-shares.

In 2020, the MSCI Emerging Markets Index allocated 40.95% of its weight to the Chinese market, encompassing large and mid-cap A-shares from China. In 2018, the same index allocated 32.72% to the Chinese market. In a noteworthy move, MSCI announced in February 2019 that it would raise the weight of large-cap A-shares from 15% to 20% by November 2019, a decision well-received by investors. This adjustment ultimately incorporated 253 large-cap and 168 midcap A-shares into the index.

B-Shares: Avenues for Foreign Investors

B-shares, also comprising incorporated Chinese firms, are quoted in foreign currencies, including the U.S. dollar (USD) and the Hong Kong dollar (HKD), contingent on the listing exchange. B-shares offer broader accessibility to foreign investors.

H-shares: Introduction and Regulations

H-shares symbolize shares from publicly traded Chinese corporations listed on the Hong Kong Stock Exchange. These shares are issued in China, adhering to Chinese legal provisions, and are subject to the listing requirements of the Hong Kong Stock Exchange.

The regulations stipulate that annual financial statements must adhere to Hong Kong or international accounting standards. Additionally, a company's articles of incorporation must include clauses elucidating the distinctions between domestic and foreign shares, encompassing H-shares, and delineating the rights accorded to each investor.

Diverging from A-shares traded on the Shanghai or Shenzhen stock exchanges in Chinese renminbi, H-shares are denominated and traded in Hong Kong dollars. Furthermore, they are open for trading by all categories of investors. Typically, disparities in pricing exist between a company's A-shares and H-shares, with A-shares often commanding a premium over H-shares.

Investing in China: Options for Foreign Investors

American Depositary Receipts (ADRs)

A means to invest in Chinese companies is through American Depositary Receipts. These certificates, representing foreign company shares, are traded on U.S. markets. ADRs provide a gateway for investors otherwise restricted from foreign investments. Being denominated in U.S. dollars, they eliminate pricing and currency fluctuations concerns.

Shanghai-Hong Kong Stock Connect

Another avenue for investment is the Shanghai-Hong Kong Stock Connect system, established in 2014. This system facilitates mutual market access by linking the Shanghai and Hong Kong Stock Exchanges. Investors can trade shares in both markets using their brokers. Notably, transactions occur in Chinese yuan (CNY), not Hong Kong dollars. This arrangement removes typical restrictions for foreign investors seeking to buy A-shares.


Investing in Chinese markets offers various share categories. A-shares, primarily for mainland Chinese citizens, can be accessed by foreign investors through QFIIs or alternative means like ADRs. The MSCI Emerging Markets Index now includes A-shares, enhancing their appeal. B-shares, quoted in foreign currencies, provide broader access, while H-shares on the Hong Kong Stock Exchange are open to all. ADRs and the Shanghai-Hong Kong Stock Connect system offer pathways for foreign investors to engage with Chinese companies, addressing restrictions and currency concerns and enriching China's investment landscape.

American Depositary Receipt (ADR)
Shanghai Stock Exchange (SSE)
Shenzhen Stock Exchange (SZSE)
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