Yue’s Yappings

Its no secret that the Chinese stock market is booming and the value of the RMB is increasing. Wondering if I could (let alone should) invest in the Shanghai stock market, when I was in Shanghai earlier this year I did some investigating. I know a lot of people also wonder about this, so here is what I found.

The answer is that foreigners cannot buy mutual funds or “A shares” which are Chinese company stocks traded in the national currency, the RMB. However, foreigners can buy “B shares” which are Chinese company stocks traded in US dollars. However, there is talk that the B shares will be abolished in the near future.

Since many foreigners working in China cannot use the RMB they earn to buy “A shares,” many turn to real estate. In addition, many foreigners and overseas Chinese nationals, expecting the RMB to appreciate, wire dollars to China, conver them to RMB, and then also invest in real estate. As you would expect, this has contributed to red-hot real estate market in many of China’s large eastern citites. To help cool down the market, the Chinese government changed its policies to make it very difficult for foreigners in China to purchase real estate.

So, if you want to invest in China and it’s currency, but aren’t a Chinese national, then your investment options are severely limited. You can open brokerage account in China with foreign passport and wire dollar into the brokage acount and purchase “B shares” in the China stock market or convert the dollar to RMB, and put the RMB in to a saving account in a bank of China.