What is 'China Concepts Stock'

China Concepts Stock is the stock of a company whose assets or earnings have significant activities in China. China concepts stocks trade on different stock exchanges such as the Hong Kong Stock Exchange, under the name of H-Shares or "red chip" stocks. The People's Republic of China is undergoing a major financial transformation, so many leading mainland-based companies choose to list themselves elsewhere to gain access to investor capital as quickly as possible.

China Concepts Stocks are considered one of the purest investment plays on China's long-term economic growth outside of direct mainland investment.

BREAKING DOWN 'China Concepts Stock'

Beginning in 1980, the PRC (Peoples Republic of China) started opening up to joint ventures with foreign companies. China is developing capital markets of its own to attract foreign funds; they have taken part in the some of the biggest initial public offerings in history as they transition large state-run businesses into publicly-traded companies.

Awakening the Tiger

China Concepts Stocks are listed on exchanges around the globe, including: Hong Kong Stock Exchange (HKEx), Singapore Exchange (SGX), New York Stock Exchange (NYSE), Nasdaq, London Stock Exchange (LSE), Euronext, and the Tokyo Stock Exchange (TSE). Many of the shares listed on the U.S. exchanges are American Despositary Receipts (ADRs), a negotiable certificate issued by a U.S. bank representing a specified number of shares (or one share) in a foreign stock traded on a U.S. exchange.

Investing in the shares of companies based in China is not for the fainthearted. The nation's economy is the second-largest in the world behind the U.S., yet its transparency and financial reporting leaves much to be desired. Share prices are volatile as well, with wide swings often based on political factors. The Chinese government meddles more in the markets than U.S. investors may be accustomed to.

The Chinese government has effectively proven its willingness to change the rules of the game when it seems favorable. This has harmed the credibility of both the stock market and the government, making it hard to trust China’s commitment to a more liberalized economy.

Data on individual companies operating in China can be unreliable and the SEC has investigated stock frauds tied to companies in the region. The Chinese government itself has been accused of putting out false figures about its economy. Its annual growth rate, for eample, may be anywhere from zero percent to in the double digits.

Gary Shilling, president of economic research firm A. Gary Shilling and Co., told CNBC, "Nobody knows for sure, but when we look at things that are harder numbers to fudge... our estimate [for China GDP] growth is probably about 3.5% versus roughly 7% [reported by China in 2015]."

RELATED TERMS
  1. China ETF

    A China ETF is an exchange-traded fund that invests in and tracks ...
  2. H-Shares

    H-shares belong to companies from the Chinese mainland that are ...
  3. Exchange

    An exchange is a marketplace in which securities, commodities, ...
  4. Singapore Exchange - SGX

    The Singapore Exchange is a full service equities, fixed income ...
  5. Four Asian Tigers

    The Four Asian Tigers refer to the high-growth economies of Hong ...
  6. Concept Company

    A concept company is an early-stage firm with a novel or innovative ...
Related Articles
  1. Tech

    China's Economic Collapse Good For the U.S.?

    After years of unprecedented expansion, growth in China has finally begun to slow. Does the United States need to worry or can it benefit?
  2. Financial Advisor

    Why When China Sneezes the U.S. Catches a Cold

    The size and breadth of the Chinese economy will naturally affect the U.S. Making clients aware of it can help manage portfolio expectations.
  3. Investing

    Investing In China

    China represents a significant investment opportunity. Investors should understand the risks, rewards, focus on shareholder-friendly companies and stick with investments they understand.
  4. Insights

    5 Things to Know About the Chinese Economy

    China's once fast-moving economy has slowed in recent years, but it still has a lot of room for growth.
  5. Investing

    Stock Exchanges Around The World

    We tell you about five of the most popular stock exchanges from around the globe.
  6. Insights

    A Look At China's Growing Influence On The World

    With the second-largest economy in the world, China has significant (and growing) influence on the global economy. But how is that impact figured?
  7. Financial Advisor

    China’s Stock Markets vs U.S. Stock Markets

    The U.S. and China are home to the biggest stock markets in the world, but they are very different in a number of important ways.
  8. Investing

    Slow Growth in China to Affect Asia-Pacific

    As China's growth slows, it will affect different countries in the Asia-Pacific region differently.
  9. Trading

    How Will China's Currency Moves Affect The U.S.?

    We look at what China's reaction to a currency manipulation bill mean for the U.S., businesses, consumers and investors.
  10. Investing

    The Chinese Economy Needs More Stimulus

    China's central bank, the Peoples' Bank of China (PBoC), has cut its benchmark interest rate for the sixth time in 12 months, to a record low of 4.35%, casting doubt on the growth expectations ...
RELATED FAQS
  1. What are all of the securities markets in the U.S.A?

    Securities can be bought and sold via a number of exchanges in the US. Learn about the major and somewhat lesser-known U.S. ... Read Answer >>
  2. What countries contribute the largest weight to the global electronics sector?

    Learn how China, America and Germany are contributing to producing and exporting electronics globally as the top countries ... Read Answer >>
  3. Move from an OTC to a major exchange

    In order to move a company from over-the-counter market to a major exchange, a number of conditions must be met to being ... Read Answer >>
  4. What are the advantages and disadvantages of listing on the Nasdaq versus other stock ...

    Discover some of the primary advantages and disadvantages that exist for companies listed on the Nasdaq exchange rather than ... Read Answer >>
  5. How can industrialization affect the national economy of less developed countries ...

    Read about how industrialization impacts economic growth in less developed countries (LDCs), using Hong Kong and Great Britain ... Read Answer >>
Trading Center