# Understanding China A-Shares: Definition, History & Differences from B-Shares

## What Are China A-Shares?

China A-shares are the stock shares of mainland [China-based companies](https://www.investopedia.com/10-biggest-chinese-companies-5077387) that trade on the two Chinese stock exchanges, the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE). Historically, China A-shares were only available for purchase by mainland citizens due to China's restrictions on foreign investment.

Since 2003, some foreign institutions have been allowed to buy these shares through the [Qualified Foreign Institutional Investor](https://www.investopedia.com/terms/q/qualified-foreign-institutional-investor-qfii.asp) (QFII) system. Established in 2002, the QFII program allows specified licensed international investors to buy and sell on mainland China's stock exchanges.

A-shares are also known as domestic shares because they use the Chinese renminbi (RMB) for valuation.

### Key Takeaways

*   China A-shares are shares of mainland China-based companies traded in RMB on the Shanghai and Shenzhen Stock Exchanges.  
    
*   Initially restricted to local investors, A-shares opened to select foreign investors through the Qualified Foreign Institutional Investor (QFII) system in 2003.  
    
*   B-shares differ from A-shares by being quoted in foreign currencies and more accessible to foreign investors.  
    
*   The Shanghai Stock Exchange's SSE 180 Index measures key performance of A-shares, representing a diverse mix of sectors and sizes.  
    
*   Efforts to increase foreign access to A-shares continue as China transitions towards a more advanced economy.

## Comparing China A-Shares and B-Shares

China A-shares are different from B-shares. A-shares are only quoted in RMB, while B-shares are quoted in foreign currencies, such as the U.S. dollar, and are more widely available to foreign investors. Foreign investors may have difficulty accessing A-shares because of Chinese government regulations, and Chinese investors may have difficulty accessing B shares most notably for currency-exchange reasons. Some companies opt to have their stock listed on both the A-shares and B-shares market.

Due to the limited access of Chinese investors to B-shares, the stock of the same company often trades at much higher valuations on the A-shares market than on the B-shares market. Although foreign investors may now invest in A-shares, there is a monthly 20% limit on repatriation of funds to foreign countries.

The Shanghai Stock Exchange (SSE) publishes the key performance index for A-shares, known as the [SSE 180 Index](https://www.investopedia.com/terms/s/sse-composite.asp). In composing the index, the exchange selects 180 stocks listed on the SSE. The selection covers different sectors, sizes, and liquidity to ensure proper representation. As a result, the index's performance shows the overall state and operations of the Shanghai securities market.

## Evolution and Historical Context of China A-Shares

The index has experienced significant ups and downs since its start in 1990, including major changes in 2002. Despite fluctuations, it has grown as the Chinese economy developed. The years 2015 to 2016 were tough, with the index dropping 21.55% in one year by July 2016.

As China grows from an emerging market to an [advanced economy](https://www.investopedia.com/terms/a/advanced-economies.asp), there is substantial demand for Chinese [equity](https://www.investopedia.com/terms/e/equity.asp). Stock exchange regulators continue efforts to make A-shares more broadly available to foreign investors and have them recognized by the global investing community.

In June 2017, the MSCI Emerging Markets Index announced a plan to gradually add [222 China A large-cap stocks](https://www.cnbc.com/2017/06/20/msci-adds-mainland-chinese-a-shares-to-key-emerging-markets-index-on-fourth-review.html). In May 2018, the index began to [partially include China's large-cap A shares](https://www.msci.com/msci-china-a-inclusion), which make up 5% of the index. Full inclusion would make up 40% of the index.

Countries like China need to open their markets to global investors to remain competitive and succeed economically. China A-shares provide an alternative investment for those interested in [trading in Chinese securities](https://www.investopedia.com/ask/answers/05/foreignstocks.asp).