Chinese capital markets

Chinese Equity Market

Depth, liquidity, profitability

More than 40 years ago, in 1978, China chose the path to opening up to the rest of the world, building a free market and undergoing modernisation reforms. Gradually, an industrial economy was created based on foreign investments, cheap labour and export growth.

By now, China has grown into the second largest economy and second largest equity market in the world and currently is implementing a long-term strategy of economic transformation based on domestic demand and high-tech development.

China has managed crisis of 2008 and 2014 better than most other countries, its GDP annual growth has continued even throughout the 2020 COVID crisis.

Consumer brands such as Alibaba, Xiaomi, ICBC, Tencent, Huawei and others were born in China and became popular around the world as the result of reforms and the government's strategy of innovation, domestic demand and domestic brands development.

Regulation of capital markets in China was designed from the start to isolate the domestic capital markets from foreign capital and to lock up the domestic capital within the country at the same time. Nevertheless, the regulation policy started to shift towards gradual liberalisation and opening up after China became part of the World Trade Organisation in 2001.

During the same year, the B-shares mechanism available for foreign investors was launched on mainland stock exchanges along with domestic A-shares exclusively available to Chinese citizens only. One year later, the QFII mechanism was introduced to allow some of the largest global investors limited access to the domestic A-shares market. In 2006 a mirror mechanism called QDII was launched and many Chinese asset managers successfully raised billions of RMB from domestic investors to invest in Hong Kong and other global securities. In 2014 the first investment bridge between Shanghai and Hong Kong stock exchanges was launched, opening up two-way cross-border equities trading within regulatory limits with regard to available stocks, daily and overall quotas. All such channels have their own regulatory requirements and limitations, which gradually relax with each passing year.

One of the most attractive investment ideas in China is getting a share of its initial public offerings. Participation in A-shares IPO is an extremely competitive process and the probability of getting the required allocation is quite low. Nevertheless, there are ways to increase one's chances to participate in the birth of a new stock.

Chinese Share Classes

Country of
Country of
Availability to
mainland investors foreign investors
A-shares CNY
Under QFI and Stock Connect programs
B-shares US$ (on SSE)
Via foreign currency accounts

Without limitations
HK$ (on SZSE)
(Hong Kong)
H-shares HK$
Under QDII and Stock Connect programs
Outside PRC Red chips
Singapore S-chips S$
Under QDII
USA N-shares US$


The main and the most numerous group of stocks of mainland listed companies are referred to as the "A-shares". A-shares are denominated in RMB and traded on domestic exchanges. A-shares are actively traded by domestic retail and institutional investors. Foreign investors need to obtain special licenses and permissions or use the Stock Connect channel to access A-shares.


B-shares were first launched in early 1990-s as "Chinese stocks for foreigners" as an alternative to A-shares, and became accessible to domestic investors as well since 2001. B-shares are traded in US dollars on the Shanghai Stock Exchange and in HK dollars on the Shenzhen Stock Exchange. There is currently an ever smaller number of less than 100 B-shares outstanding and there has been no new B-shares issued for the last 20 years.


H-shares are shares of mainland companies incorporated that are traded on the Hong Kong Stock Exchange. Mainland companies can issue both A- and H-shares targeting domestics and international investors respectively. There is no conversion between A- and H-shares of the same company, therefore substantial price discrepancies may and do occur, which are tracked by the Hang Seng Stock Connect China AH Premium Index.

Red chips

Red chips are HKEX-listed stocks of mainland China companies incorporated outside of the mainland China and controlled, either directly or indirectly, by the central, provincial or municipal governments of the PRC but listed in Hong Kong to allow overseas investment in the companies.

P-chips & S-chips

P-chips refers to Chinese companies listed on the Hong Kong Stock Exchange which are incorporated in international offshore jurisdictions with operations in mainland China, and are run by private sector owners. S-chips are Chinese companies listed on the Singapore Exchange.


N-Shares refers to Chinese companies listed on US exchanges. They may or may not be incorporated in China, but they have their main business operations in mainland China. Most of them are incorporated in Bermuda, the Cayman Islands, the BVI, Nevada or Delaware.

Major Stock Exchanges



The Shanghai Stock Exchange was relaunched in December 1990. The exchange is a platform for stocks, funds, bonds and derivatives trading. In equities, it focuses mainly on large-scale private and state companies. A new innovation and technology STAR Board was introduced in 2019. The exchange is part of the top 10 world largest stock exchanges in terms of market capitalisation and the trading volume.


The Shenzhen Stock Exchange has been operating in the southern city of Shenzhen (the mainland counterpart of Hong Kong) since December 1990. The stock exchange specialises on small and medium-sized companies, as well as on the technological sector (ChiNext Board). The Shenzhen Stock Exchange is also in the top 10 largest stock exchanges of the world, both in terms of capitalisation and the average trading volume.


National Equities Exchange and Quotations (NEEQ, or «The New Third Board») was launched in Beijing in January 2013. During the first 6 years of operation the stock exchange has attracted more than 10 thousand issuers, thanks to the flexible listing requirements, but this led to low liquidity of the secondary market at the same time.

Exchanges: Key Highlights

Market capitalisation Trading Volume Average
Number of IPOs
RMB, BN* RUB, BN* RMB, BN* RUB, BN* 2019** 2020***
SSE 1 753 43 328 471 032 459 4 990 16,03 123 143
Main Board 1 588 40 440 439 636 419 4 555 53 48
STAR Board 165 2 888 31 396 40 435 70 95
SZSE 2 316 32 619 354 619 599 6 515 33,40 78 83
Main Board 505 9 376 101 935 132 1 436 0 0
SME Board 962 13 471 146 450 213 2 323 26 22
ChiNext Board 849 9 772 106 234 253 2 756 52 61
NEEQ 792 2 793 30 364 0,66 7,2 21,14 0 32
MOEX 208 3 931 42 731 8 88 5,7 0 0

* Bank of Russia exchange rate as of 31.08.2020: 1 RMB = 10,8713 RUB.** 2019 end of the year.*** 2020 as of 31.08.2020.

Major Indices

SSE Composite Index

the main index of the Shanghai Stock Exchange

Key Parameters (data as of 31.08.2020)

Total constituents 1 753
Capitalisation (tn yuan) 40,6
P/E (average) 15,7
P/B (average) 1,54
Dividend yield (average) 2,12%
YTD performance 11,33%
Ticker (Bloomberg) SHCOMP

SHCOMP Sector Breakdown

Consumer staples
Consumer discretionary
Health care
Information technology

SZSE Component Index

the most liquid 500 stocks on the Shenzhen Stock Exchange

Key Parameters (data as of 30.06.2020)

Total constituents 500
Capitalisation (tn yuan) 10,4
P/E (average) 26,85
P/B (average) 3,02
YTD performance 14,97%
2019 performance 44,08%
Ticker (Bloomberg) SZCOMP

SZCOMP Sector Breakdown

Information technology
Health care
Consumer discretionary
Consumer staples
Real estate

CSI 300

the most liquid 300 stocks on both exchanges

Key Parameters (data as of 31.08.2020)

Total constituents 300
Capitalisation (tn yuan) 39,5
P/E (average) 15,54
P/B (average) 1,66
Dividend yield (average) 1,81%
YTD performance 17,57%
Ticker (Bloomberg) SHSZ300

SHSZ300 Sector Breakdown

Consumer staples
Information technology
Consumer discretionary
Health care

Hang Seng Stock Connect China AH Premium Index (HSAHP)

The index tracks the weighted average premium or discount of A-shares versus H-shares of the same issuer. The index includes the most liquid 65 out of 127 stocks of dual listed Chinese companies. A premium value means that the price of an A-share of a particular company is higher than the price of its H-share.

NEEQ Active Stocks Index

The most liquid 50 stocks out of a total of 8397 stocks (as of 30 September 2020) listed on the the third Chinese exchange NEEQ (The New Third Board). Liquidity is the main area of concern for most of the stocks listed on this youngest exchange due to relaxed listing requirements and the resulting abundance of listed companies.

Initial Public Offerings

Shanghai Stock Exchange (SSE) Shenzhen Stock Exchange (SZSE)
Main Board STAR Board SME Board ChiNext Board
2019* 2020** 2019* 2020** 2019* 2020** 2019* 2020**
Number of IPOs 53 48 70 95 26 22 52 61
Average amount raised, RMB BN*** 1,9 1,6 1,2 1,7 1,3 0,7 0,6 0,7
Performance in the 1st day of trading, % average 11,82 16,15 1,47 3,44 20,01 19,50 19,58 18,82
minimum 0,00 0,00 -26,20 -30,09 19,94 9,07 9,09 -11,04
maximum 20,25 20,12 38,85 60,42 20,11 20,05 20,08 114,55

* 2019 end of the year.** 2020 as of 31.08.2020.*** Bank of Russia exchange rate as of 31.08.2020: 1 RMB = 10,8713 RUB.

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