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H-shares are investment shares offered by Hong Kong through their stock market, and they different greatly from other Chinese shares. While Chinese law is used to regulate and control H-shares, the shares themselves are listed in Hong Kong’s currency. As of 2011, Chinese mainland citizens normally are legally barred from investing outside of China’s A-shares and B-shares, but mainland citizens are able to invest in these, as well. International investors also are open to Hong Kong-based shares. For a business to be listed on the Hong Kong stock market, it must be registered through the mainland.
Hong Kong has its own stock market that, in many ways, runs separately from the Chinese mainland stock market. While there are many differences and exceptions to this stock exchange, Hong Kong’s stock market and its associated H-shares still are subject to Chinese law. At the same time, many of the restrictions placed on the Chinese mainland stock market are not forced on Hong Kong’s stock market.
The Chinese mainland and Hong Kong have separate currencies, even though Hong Kong is part of China. For this reason, H-shares are listed in Hong Kong’s currency. The legal status and trading features of H-shares also more closely resemble other financial instruments native to Hong Kong that the Chinese mainland either does not feature or does not endorse.
China’s political standing means most Chinese mainland citizens are legally barred from investing outside of China’s native A-shares and B-shares. After 2007, China allowed mainland citizens to purchase H-shares, which made the market expand significantly. At the same time, Hong Kong citizens are, as of 2011, prohibited from investing in the mainland’s stock exchange. H-shares also are open to international investors, who previously were prohibited from investing in Chinese markets or were severely restricted in their investing opportunities.
There are many businesses on the Hong Kong stock market that are eligible to sell H-shares, and most Chinese businesses are listed here. To be eligible, even though the stock is in Hong Kong, the business must be incorporated and registered to the mainland. The business also must satisfy other requirements to legally sell these shares, but the other requirements are based on what the business sells and its size, among other factors. A company can be listed for H-, A- and B-shares at the same time, but the price of each may be different.
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