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So, you want to trade stocks in China?
The good news is that as of the last decade, investment opportunities have been opening up for Chinese citizens from both inside and outside of China. Some of the world’s largest companies are now publicly traded on Chinese stock exchanges.
Before we begin with this guide on following a stock market, it might be prudent to provide some context around why new traders should invest their money in Chinese markets.
The first reason is diversification: an international portfolio can help balance out your overall financial risk by adding a country with different economic policies and practices than your home country or your primary trading location. Even within China, there are several different markets you can choose from – Hong Kong, Shanghai, Shenzhen, etc.
The second reason is yield: China is currently undertaking several reforms to encourage domestic and foreign investment in its stock markets. This has been steadily increasing dividends paid by Chinese companies traded on various exchanges. This trend is likely to continue.
Finally, it’s prudent to be invested domestically if your primary job or source of income originates from within that country – you have a better feel for what’s going on economically than someone who doesn’t live there.
If you’re remitting money back home to family living in China, then it would make sense for you to participate in Chinese markets directly to maintain price parity between the two currencies.
I’m not saying that you shouldn’t invest in foreign stocks if you’ve already got a diversified portfolio. Still, it makes sense to invest some of your money into China directly or indirectly (via mutual funds).
If you’re living and working overseas, then the next question is: how can I get Chinese stock quotes? The answer depends on what country and city you live in.
Which Chinese Exchanges To Use?
As of this writing, five primary exchanges list publicly traded companies:
- Shanghai Stock Exchange (上证所)
- Hong Kong Stock Exchange (香港联合交易所有限公司)
- Shenzhen Stock Exchange (深圳证券交易所)
- China Financial Futures Exchange (中国金融期货交易所)
- National Equities Exchange and Quotations (国家证券公司)
The first three are open to both non-Chinese citizens AND residents, while the last two are only open to people living in Mainland China. Each exchange has a different method of getting quotes, announcements, etc., so I won’t get into the specifics here.
However, I will list some free services that provide stock quotes for Chinese markets if you live or work overseas. Throw these sites into Google Translate to get them in English. The following two sources also provide essential news about markets in China:
- Beijing Xinhua General Overseas Edition (新华社北京青年报)
- China Securities Journal (中国证券报)
This should be enough information to get you started. Below I have included a brief guide on how to trade stocks in China from overseas, though if you have any questions feel free to post them in the comments section.
Step 1: Find A Broker.
As with most other places globally, online brokerage services are a great way to start trading stocks from your laptop or smartphone. However, before you can open an account, you need to find an actual broker.
The three biggest online stock brokerage firms in China are: –
- China Online (中国网)
- CTS (马特)
- Hong Kong Securities Co. Ltd. (香港证券有限公司)
You can find more information on each of these by googling their names in Chinese characters (or you can search English websites like Google Translate).
Nowadays, it’s common for foreign residents to also open up accounts with Hong Kong brokers if they don’t want to deal with the cumbersome process of opening an account directly in China. However, due diligence is encouraged when selecting a firm to work with because not all companies are trustworthy.
Step 2: Fund Your Account With Rmb
Once you’ve picked out a broker, then it’s time to fund your account. The basic steps are as follows:
- Contact the company asking them how to send money into your account via bank transfer (occasionally direct deposit is also accepted)
- Request that they send you an official receipt for the transaction with their letterhead, name, etc., clearly visible on the document
- Send this receipt along with passport photos and other documents like proof of address to your brokerage firm.
If you’re opening up an online trading account, then in most cases, they will accept wire transfers directly from either Western or Chinese banks; if you’ve got an employee at one of the four state-owned banks, then things could also be much easier for you.
I won’t detail specific details on this process since regulations may change depending on where your trading account is located in China, but just know that the general idea is to use fiat money instead of crypto-currencies like Bitcoins or Litecoins.
Step 3: Buy And Sell Stock In Rmb
Once your account has been funded, and you’ve started trading, nothing stops you from buying and selling stocks using either cash or margin (borrowing).
As with anywhere else in the world, it’s essential to do your research before making any trades. However, it’s especially true when dealing with Chinese markets because regulations are relatively loose compared to other countries such as Japan.
That Being Said… One Last Word Of Warning
In the past several years, there have been cases of people opening up trading accounts with Chinese stock brokerage firms, buying stocks and then disappearing once they’ve taken their money out.
These kinds of “scam artists” are less common nowadays, but it’s still essential to do thorough research into any broker you plan on using before moving forward with any investment plans. You can read more about Hong Kong stocks (股票) here.