A:

The Chinese stock market has no history of short sales. However, in 2007, the Chinese government, in an effort to increase the types of financial instruments available to market participants, considered introducing short selling to the market. In 2008, the China Securities Regulatory Commission (CSRC) announced that it would introduce margin trading and short selling on a trial basis, which was briefly delayed due to preparations for the 2008 summer Olympics.

After the Olympics, 11 top brokerage firms, including CITIC and Haitong securities, in China received authorization to start the trial short sales program. In other words, these 11 brokerage firms are the only firms allowed to short sell. As of 2009, the only short selling in the Chinese stock market occurs through the 11 brokerage firms that are part of the trial program. As of May 2009, there has not been any announcement by the commission to make short selling a permanent feature of the Chinese stock market.

To learn more, see our Short Selling Tutorial.

This question was answered by Chizoba Morah

RELATED FAQS
  1. Can you short sell stocks that are trading below $5? My broker says that I can't.

    Short selling can be very risky for both the investor and the broker. Brokers will often tell investors that only stocks ... Read Answer >>
  2. Why does my broker allow me to enter only day orders for short selling?

    Put simply, brokerage firms restrict short sales to day orders because of the complexity of the short sale transaction and ... Read Answer >>
  3. Why do you need a margin account to short sell stocks?

    The reason that margin accounts and only margin accounts can be used to short sell stocks has to do with Regulation T, a ... Read Answer >>
  4. When short selling a stock, how long does a short seller have before covering?

    There are no general rules regarding how long a short sale can last before being closed out. A short sale is a transaction ... Read Answer >>
  5. Why is short selling illegal in some countries but legal in the U.S.?

    Discover why many countries around the world banned the practice of short selling financial stocks and why the United States ... Read Answer >>
  6. Is short selling ethical?

    Understand the concept and practice of short selling, and examine the ethical questions that some investors raise in regard ... Read Answer >>
Related Articles
  1. ETFs & Mutual Funds

    Where Do Chinese Equities Go from Here?

    Is it time to go long or short on Chinese equities?
  2. Investing

    The Basics Of Short Selling

    Short sellers enable the markets to function smoothly by providing liquidity, and also serve as a restraining influence on investors’ over-exuberance.
  3. Investing

    Short Selling: The Risks

    Now that we've introduced short selling, let's make one thing clear: shorting is risky. Actually, we'll rephrase that. Shorting is very, very risky. It's not unlike running with ...
  4. Investing

    Guide to Short Selling

    Want to profit on declining stocks? This trading strategy does just that.
  5. Investing

    Short Selling: Conclusion

    Short selling is another technique you can add to your trading toolbox. That is, if it fits with your risk tolerance and investing style. Short selling provides a sizable opportunity with a hefty ...
  6. Markets

    Is It the Right Time to Invest in China?

    A crash in August and a partial recovery thereafter. What's driving China's markets, and are Chinese investments still a good bet in the long run?
  7. Investing

    Short Selling: Introduction

    Have you ever been absolutely sure that a stock was going to decline and wanted to profit from its regrettable demise? Have you ever wished that you could see your portfolio increase in value ...
  8. Markets

    How the Chinese Stock Market Heavily Affects the US

    Learn about the ways in which the Chinese stock market affects the U.S. economy, the dollar, the interest rate and imports and exports.
  9. Markets

    Do the Olympics Boost Market Performance?

    Learn about the economics of the Olympics, and why estimates about stock market boosts for the host country are probably incorrect.
  10. ETFs & Mutual Funds

    A Detailed Look Into China's Options Market

    As the Chinese options market gradually takes shape, we provide an overview, including details of the initial phase and building blocks, primary beneficiaries, the impact on the overall financial ...
RELATED TERMS
  1. Short Market Value

    The market value of securities sold short through an individual's ...
  2. China Securities Regulatory Commission - CSRC

    The main securities regulatory body in China, which was created ...
  3. Short Selling

    Short selling is the sale of a security that is not owned by ...
  4. Short Covering

    Buying back borrowed securities in order to close an open short ...
  5. Weak Shorts

    Traders or investors who hold a short position in a stock or ...
  6. Short Interest

    The quantity of stock shares that investors have sold short but ...
Hot Definitions
  1. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  2. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  3. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  4. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  5. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  6. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
Trading Center