Can foreigners invest in the Chinese stock market?
Image by Geralt
Foreigners can indeed buy stocks and shares in both the Chinese mainland and Hong Kong, although it’s not always as straightforward as it might be for them back home.
Playing the Chinese stock market
The Chinese stock market is divided into three kinds of shares: A Shares, which are restricted to Chinese citizens and Qualified Foreign Institutional Investors; B Shares, which are open to all foreigners, and H Shares, which are Hong-Kong-based shares and also open to foreign investment.
In order to trade in A Shares, which are bought and sold in RMB, foreign companies must first get a bank to submit a Qualified Foreign Institutional Investor application form to the China Securities Regulatory Commission (in order to get a permit allowing them to invest in RMB) and also submit an Investment Quota Application to the State Administration of Foreign Exchange.
Once these have both been done, the company can then approach a Chinese securities company to make the investment. However, there is a high threshold for entry: the company must own at least $500 million (for insurance companies, asset management companies etc) or $5 billion (for foreign securities firms and banks).
The B Shares use US dollars or HK dollars as denominations and are issued by Chinese companies listed in the Chinese mainland – although ironically they cannot be bought by Chinese citizens. If you want to trade in these shares, take your passport and residence permit to a securities firm to open a B Share account. You will need to deposit at least $1,000.
H Shares are bought in HK dollars, and are issued by Chinese companies listed in Hong Kong. In order to invest in these shares, you must go to Hong Kong and open an investment account in a HK bank, putting in at least 10,000 HK dollars. The account can be opened with your HK visa, your passport and your Chinese mainland residence permit. You must go to Hong Kong in person to open the account, but then you can return to the mainland to make deals online. It is open to anyone, foreign or Chinese.
Foreigners can also buy funds and bonds in China from commercial banks, securities firms and other sales agencies, by opening a fund or bond account at said agencies.
Security tips for investing in stock market
- To ensure that the bank or securities firm you are opening an account with is trustworthy, make sure that they have the qualifications necessary for trading. You can do so on the website of the China Securities Regulatory Commission (CSRC; no English version).
- If you are signing up to a securities firm online, make sure that the website is legitimate and not a clone or fake. Genuine securities firms do not promise profits or returns, and they will sign printed consulting contracts with you if you use their services. In addition, they are only allowed to receive money via company or business accounts, not personal accounts.
- It is advised to check whether an agency or broker has the qualifications necessary to sell securities, also at the China Securities Regulatory Commission website.
- Do not trust anyone who claims to have insider information on stock market trading.
- Do not trust anyone – even a so-called expert – who claims to be able to give precise predictions of the stock market. Likewise, don’t trust trading software that claims to be able to predict the stock market’s movements.
Useful Chinese words and phrases
|证监会||zhèng jiān huì||China Securities Regulatory Commission|