A-Shares

China A-shares

Key takeaways

• China A-shares are equity shares of mainland China–based companies traded in renminbi (RMB) on the Shanghai and Shenzhen stock exchanges.
• Historically restricted to domestic investors, A-shares opened to some foreign institutions via the Qualified Foreign Institutional Investor (QFII) framework beginning in the early 2000s.
• B-shares differ by being quoted in foreign currencies and historically more accessible to foreign investors.
• The SSE 180 Index is a key benchmark for A-shares. Gradual inclusion of A-shares in global indices has increased foreign participation but some restrictions and market idiosyncrasies remain.

What are China A-shares?

China A-shares are shares of companies incorporated in mainland China and listed on the Shanghai Stock Exchange (SSE) or Shenzhen Stock Exchange (SZSE). They are quoted and settled in Chinese renminbi (RMB), which is why they’re often called “domestic shares.” For many years these shares were reserved for Chinese nationals and domestic institutions.

A-shares vs. B-shares

• Currency: A-shares are quoted in RMB; B-shares are quoted in foreign currencies (for example, U.S. dollars for Shanghai B-shares and Hong Kong dollars for some Shenzhen listings).
• Investor access: B-shares were designed to be more accessible to foreign investors, while A-shares were historically restricted. Over time, access to A-shares has expanded for qualified foreign investors.
• Pricing differences: Limited cross-market access and different investor bases can lead to the same company’s stock trading at different valuations on the A- and B-share markets. Some companies list both A- and B-shares.

Foreign access and regulation

China has taken gradual steps to allow foreign investment in A-shares. The Qualified Foreign Institutional Investor (QFII) program—established in the early 2000s—permitted licensed foreign institutions to buy and sell on mainland exchanges. Access has continued to widen through quota relaxations and additional channels, but some regulatory controls and operational frictions (including currency and repatriation considerations) can persist.

Market indices and performance

The Shanghai Stock Exchange composes benchmarks—such as the SSE 180 Index—that select representative A-share listings across sectors, market caps, and liquidity to reflect the exchange’s performance. A-share markets have experienced significant volatility since their inception in 1990, including sharp downturns (for example, a pronounced fall during 2015–2016).

Global index providers have progressively included A-shares in their benchmarks. Plans announced in 2017 to add hundreds of large-cap A-shares to the MSCI Emerging Markets Index led to partial inclusion starting in 2018; full inclusion would substantially raise A-shares’ weight in such indices and increase passive foreign flows.

Historical evolution and globalization

A-shares evolved from a largely closed domestic market to one increasingly integrated with global capital markets. This transition reflects China’s broader economic development and policy efforts to attract foreign capital while managing capital-account risks. Inclusion in international indices and reform of investment channels are central aspects of that evolution.

Investment considerations

• Market access and procedures: Foreign investors should understand the available channels (QFII, Stock Connect, etc.), eligibility, and operational rules.
• Currency and repatriation: Trading and settlement in RMB and any limits or procedures for repatriating proceeds can affect returns and liquidity.
• Valuation differences: Domestic investor behavior, regulatory constraints, and differing liquidity conditions can cause A-share valuations to diverge from offshore listings of the same companies.
• Volatility and regulatory risk: China’s equity markets can be more volatile and subject to sudden regulatory changes compared with more developed markets.

Conclusion

China A-shares offer direct exposure to mainland Chinese companies and sectors not always available through offshore listings. Over the past two decades, regulatory reforms and index inclusions have made A-shares increasingly accessible to international investors, but unique market structures, currency considerations, and ongoing liberalization mean investors should assess access channels, regulatory risks, and valuation dynamics before investing.