As the Chinese financial system opens and major indexes add the country’s domestic assets to their ranks, understanding how to buy and sell Chinese stocks and bonds is more important than ever for global investors. Here’s a breakdown of the systems used to trade in Chinese assets.
Foreign investors can buy stocks that trade in Hong Kong directly or through ETFs that track one of several widely used indexes.But to get access to either Chinese bonds or a much larger group of stocks that trade in Shenzhen and Shanghai, investors need different systems.
The first programs that gave central banks and certain institutional investors access to China’s domestic stocks and bonds are called QFII and RQFII. Both methods still have strict requirements for foreign investment.
In recent years, China has provided more direct options for foreign investors to buy domestic assets. In 2016, the China Interbank Bond Market opened a direct path for foreign investors to buy and sell Chinese bonds. Most bond investors still use the CIBM, but both stock and bond investors have new options, too.
Bond Connect and Stock Connect are hubs that link Chinese trading centers with their peers in Hong Kong, and offshore investors can settle their trades in Hong Kong without opening an onshore account.