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. 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 >>
  2. 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 >>
  3. What is the difference between a short position and a short sale?

    Learn how short selling and short positioning are different, specifically in regards to the nature of the commodity being ... Read Answer >>
  4. Under what circumstances is short selling advisable?

    Find out when short selling a stock is profitable and what an investor should keep in mind before deciding to pursue a short ... Read Answer >>
  5. How long can a trader keep a short position?

    Learn whether there are any limitations on how long may an investor hold a short position, and explore the costs associated ... Read Answer >>
  6. Is it possible to short sell real estate?

    The traditional idea of a short sale is selling something you don't have so that you can buy it back at a lower price. The ... Read Answer >>
Related Articles
  1. Trading Strategies

    Why Short Sales Are Not For Sissies

    Short selling has a number of risks that make it highly unsuitable for the novice investor.
  2. Investing Basics

    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. Active Trading Fundamentals

    Guide to Short Selling

    Want to profit on declining stocks? This trading strategy does just that.
  4. Active Trading Fundamentals

    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 ...
  5. Investing News

    What China Devaluing its Currency Means to You

    The Chinese government is showing its craftiness in managing its money supply, but will it make a difference? And what does it mean for U.S. investors?
  6. Active Trading Fundamentals

    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 ...
  7. Markets

    The Origins of the Chinese Stock Market Collapse

    Learn about some of the reasons for the volatility in the Chinese stock market, including expansion of margin lending and governmental support.
  8. Markets

    Moral Hazard in the Chinese Market

    The Chinese government faces the issue of balancing its desire to maintain stable markets through manipulation with the danger of a looming bubble if stock prices run up too much.
  9. Economics

    China's Crisis Caused by Unhealthy Stock Market Growth

    Learn how China's stock market rallied to unsustainable highs due to increased margin lending to retail investors and has since dropped rapidly.
  10. Trading Strategies

    Simulator How-To Guide: Short Selling

    Most small investors cringe at a bear market when it seems like all stocks are in a steady decline. There is, however, a technique to profit from falling stock prices called "selling short", ...
RELATED TERMS
  1. China Securities Regulatory Commission - CSRC

    The main securities regulatory body in China, which was created ...
  2. Weak Shorts

    Traders or investors who hold a short position in a stock or ...
  3. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock ...
  4. Short Interest

    The quantity of stock shares that investors have sold short but ...
  5. Phase 3

    The final phase of clinical trials for an experimental new drug, ...
  6. Short Squeeze

    A situation in which a heavily shorted stock or commodity moves ...
Hot Definitions
  1. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  2. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  3. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  4. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  5. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  6. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
Trading Center