Shares in mainland China-based companies that trade on Chinese stock exchanges such as the Shanghai Stock Exchange and the Shenzhen Stock Exchange. A-shares are generally only available for purchase by mainland citizens; foreign investment is only allowed through a tightly-regulated structure known as the Qualified Foreign Institutional Investor (QFII) system.
Most companies listed on Chinese exchanges will offer two shares classes: A-shares and B-shares. B-shares are quoted only in foreign currencies (such as the U.S. dollar) and are open to both domestic and foreign investment (provided that locals set up a foreign currency account), while A-shares are only quoted in Chinese renminbi.
The peoples’ Republic of China is working to blend the two classes of stock together, and eventually allow direct foreign investment in mainland companies. It is one of many major financial reforms that the advanced economies of the world hope will occur in the next several years; there is a tremendous amount of pent-up demand for Chinese equity, provided that the regulations become uniform and reporting requirements are in-line with global standards.
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