China vs. Hong Kong stock: Are H-shares and A-shares the same?

Publicly-traded companies in China generally fall under three share categories: A-shares, B-shares and H-shares. A-shares represent publicly listed Chinese companies that trade on Chinese stock exchanges, such as the Shenzhen and Shanghai Stock Exchanges. Public Chinese companies with H-shares are regulated by Chinese law and are freely tradable by anyone.

What are A-Shares in China?

A-shares are shares of companies based in mainland China that are listed on either the Shanghai or Shenzhen stock exchanges. A-shares are generally only available for trading by mainland Chinese citizens. However, foreign investment in these companies is only allowed through a regulated structure known as the Qualified Foreign Institutional Investor system.

A-shares are issued in China under Chinese law and are only quoted in Chinese yuan or renminbi.

What are H-Shares in China?

H-shares represent the shares of publicly traded Chinese companies listed on the Hong Kong Stock Exchange. H-shares are issued in China under Chinese law and are subject to the Hong Kong Stock Exchange's listing requirements.

The rules state that annual accounts must follow Hong Kong or international accounting standards. Also, a company’s articles of incorporation must include sections clarifying the varying nature of domestic shares and foreign shares, including H-shares, as well as the rights given to each purchaser.

Differences Between A-Shares and H-Shares

Unlike A-shares of companies listed on the Shanghai or Shenzhen stock exchanges – which trade with a face value in Chinese renminbi – H-shares of Chinese companies listed on the Hong Kong Stock Exchange are quoted and trade with a face value of Hong Kong dollars.

Also, H-shares are open for trading to all investors, while only Chinese domestic investors and Qualified Foreign Institutional Investors can trade A-shares. After 2007, China let mainland Chinese investors purchase A-shares or H-shares of companies listed on the Shanghai Stock Exchange. Prior to that, investors could purchase only A-shares, even though H-shares were also offered. Since foreign investors may trade H-shares, the shares are more liquid than A-shares.

There are usually price discrepancies between a company's A-shares and H-shares. A-shares generally trade at a premium to H-shares.