Foreign buyers get first bite at G-share market

Author: | Published: 1 Feb 2006

In August last year the Chinese government launched an ambitious programme to reform the share capital of China's 1,400 listed companies. This centred on the conversion of all non-tradable shares (often held by the state), worth a collective $250 billion, or about two-thirds of the total capitalization of China's stock market, into publicly traded and renminbi-denominated shares, traditionally known as A-shares.

A recent further step in this reform process has seen the Chinese authorities remove prohibitions on foreign investors to encourage demand for the shares of companies that have gone through this process (so-called G-share companies).

On October 26 2005 the China Securities Regulatory Commission (CSRC) and the Ministry of Commerce (Mofcom) jointly issued a notice to allow foreign investors that qualify as strategic investors to purchase the A-shares of these companies, subject to certain restrictions and limitations. The notice went on to say that the details of those...