It’s rare that anything interesting happens in China’s moribund B share market, but the last couple of weeks have been an exception – even if all the developments point to it no longer existing in the relatively near future.
Owing to China’s capital controls, there are several different types of stock listings used by Chinese companies. To recap quickly:
- A shares are mainland-incorporated Chinese companies listed on the mainland Shanghai and Shenzhen exchanges and are denominated in renminbi. They can only be bought by mainland Chinese investors and a very limited number of qualified foreign institutional investors.
- B shares are mainland-incorporated Chinese companies listed in Shanghai and Shenzhen and are denominated in US dollars (in Shanghai) and Hong Kong dollars (in Shenzhen). They can be freely bought both by foreigners and by mainland investors with foreign currency accounts.
- H shares are mainland-incorporated Chinese companies listed in Hong Kong. They can be freely bought by foreigners.
- Red chips are companies controlled by the Chinese state, but legally incorporated outside mainland China and listed in Hong Kong. Again, they can be freely bought by foreigners.
- P chips are companies controlled by private sector Chinese businessmen that are legally incorporated outside mainland China and listed abroad. Usually, P chip is used to mean specifically Hong Kong listed stocks, with S chip being used for private firms listed in Singapore and (less commonly) N share for US-listed Chinese companies and L share for London-listed Chinese companies.