A Malaysian Investor's Guide to Buying China Stocks: 2024 Complete Guide

China's stock markets, now among the largest in the world, have evolved into a powerhouse with a combined market capitalization nearing a staggering $14 trillion as of September 2024. This includes the Mainland's $9.8 trillion and Hong Kong's $4.1 trillion, which together fuel China’s economic engine—particularly in its cutting-edge technology sectors. 

Once largely off-limits to foreign investors, China's financial landscape has seen a significant transformation. Over the past two decades, the government has steadily peeled back layers of restrictions, opening the door to global investors eager to tap into the world’s second-largest economy.

At the same time, strategic reforms are making it easier for domestic companies to list on home turf, and programs aimed at enticing major overseas-listed Chinese firms back to local exchanges are gaining momentum. 

For Malaysian investors, this offers an unprecedented opportunity to ride the wave of China’s growth while diversifying portfolios into one of the most dynamic markets globally.

Major stock exchanges in China

China's stock markets are home to some of the world’s largest and most vibrant exchanges, where trillions of dollars in market capitalization flow through each day. While the Shanghai and Shenzhen Stock Exchanges are well-known as financial hubs driving China’s economic growth, recent developments have brought new attention to the Beijing Stock Exchange, aimed at nurturing smaller, innovative companies. Coupled with the Hong Kong Stock Exchange's strong international presence, these markets provide fresh opportunities for investors looking to tap into China’s dynamic economy. 

Let’s take a closer look at each of these major exchanges and the unique opportunities they offer.

1. Shanghai Stock Exchange (SSE)

The Shanghai Stock Exchange (SSE) was China's first modern stock exchange, re-established and operations began in December 1990. Today, it stands as the largest exchange in Asia and ranks among the top three globally by market capitalization, which hit a remarkable RMB 45 trillion (US$6.41 trillion) as of September 2024. SSE offers trading in various securities such as A-shares, B-shares, bonds, funds, derivatives, and Chinese Depository Receipts (CDRs).

The SSE operates two major trading boards:

Administered by the China Securities Regulatory Council (CSRC), the SSE ensures that all companies meet stringent reporting requirements, including annual audited reports and quarterly financial updates, providing investors with a level of transparency and regulatory oversight.

2. Shenzhen Stock Exchange (SZSE)

Founded on December 1, 1990, the Shenzhen Stock Exchange (SZSE) was established as part of China's sweeping economic reforms that began in the late 1970s and early 1980s. Initially, it served as a platform for trading shares of state-owned enterprises (SOEs) and collectively-owned enterprises (COEs). 

Over the years, the SZSE has transformed into one of the largest and most dynamic stock exchanges globally, with a market capitalization of RMB 32.3 trillion (US$4.5 trillion) as of September 2024.

The SZSE offers a diverse range of financial products, including A-shares and B-shares, indices, mutual funds, fixed income products, and a variety of derivative financial instruments, catering to both domestic and international investors seeking exposure to China's dynamic markets.

The SZSE operates a multi-tiered market structure consisting of two primary boards:

The SZSE is particularly renowned for its focus on smaller, emerging companies, especially within the technology sector. This focus has made it a magnet for individual investors, who form a significant proportion of the exchange's investor base, unlike many other global exchanges where institutional investors dominate.

3. Beijing Stock Exchange (BSE)

The Beijing Stock Exchange (BSE) is China's newest stock market, officially launched on November 15, 2021. The BSE was established by reforming the National Equities Exchange and Quotations (NEEQ), commonly referred to as the "New Third Board." 

It was designed to address the growing need for financing among small and medium-sized enterprises (SMEs), particularly those focused on innovation and high-tech industries. As of September 2024, there are a total of 253 listed companies and the market capitalization of the exchange reached over RMB 402 billion (approximately US$57 billion).

The BSE primarily focuses on stocks of SMEs, with an emphasis on companies that are innovation-oriented. The exchange offers:

• Stocks of small and medium-sized enterprises
• Initial public offerings (IPOs) for eligible companies

Unlike other major Chinese exchanges, the BSE doesn’t operate multiple boards but is closely tied to the tiered structure of the NEEQ. Notably:

• NEEQ Select Board: This high-tier market formed the foundation of the BSE, with 71 companies transferred from this board when the BSE was launched.
• NEEQ Innovation Board: Companies listed on this second-tier board can apply for listing on the BSE if they meet specific regulatory and financial requirements.

Additional Information about BSE

The BSE is designed to support SMEs in China, especially those operating in strategic emerging industries such as technology and innovation. It features less stringent listing requirements compared to the Shanghai and Shenzhen exchanges, making it more accessible to smaller companies with high growth potential. 

However, individual investors are subject to specific participation rules; they must have at least 500,000 yuan in securities assets and a minimum of two years of trading experience to invest in the BSE.

In terms of trading regulations, the BSE enforces a 30% daily price fluctuation limit following the first day of trading for any stock, providing a measure of stability in the volatile SME market.

4. Hong Kong Stock Exchange (HKEX)

The Hong Kong Stock Exchange (HKEX) is one of the world’s premier financial hubs, playing a critical role in connecting China to global markets. Established in 1891 as The Association of Stockbrokers in Hong Kong, the exchange underwent several key transformations over the years.

In 2000, HKEX became a powerhouse through the merger of the Stock Exchange, the Futures Exchange, and the Hong Kong Securities Clearing Company, all coming under a single holding company, Hong Kong Exchanges and Clearing Limited (HKEX).

As of August 2024, HKEX had a market capitalization of approximately HK$31.7 trillion (US$4.1 trillion), underscoring its importance as one of the largest exchanges in the world.

HKEX offers a broad array of financial products, making it a versatile platform for global and local investors alike. These products include:

• Equity securities
• Depositary receipts
• Debt securities
• Unit trusts/mutual funds, including ETFs and REITs
• Structured products
• Derivative products such as index and stock futures and options, interest rate and fixed income products, and gold futures

This comprehensive product offering enables investors to gain exposure to various asset classes and market sectors, from large blue-chip companies to niche growth stocks and commodities.

The Hong Kong Stock Exchange operates two primary boards:

In total, HKEX had 2,621 listed companies by August 2024 across its two main boards, solidifying its position as a leading global exchange. Beyond equities, HKEX also operates a multi-tiered market structure, including vibrant derivatives and commodities markets, providing a diverse range of trading and investment opportunities for global market participants.

For investors, HKEX offers unique advantages:

• International Reach: HKEX-listed companies benefit from strong regulatory oversight and global liquidity, making it an attractive platform for investors seeking to balance the benefits of China’s growth with a more familiar, stable regulatory environment.
• Varied Investment Opportunities: From large state-owned enterprises to cutting-edge technology firms, HKEX offers access to a diverse array of Chinese companies across multiple sectors.

Understanding the different classes of Chinese Shares and Securities

China's stock market is a diverse landscape, offering various share classes that provide investors with different levels of access to Chinese companies. For those looking to invest in Chinese stocks, it's essential to understand the distinct share classes available and how they operate across multiple exchanges. 

Each class presents unique opportunities, restrictions, and currency denominations, creating a complex yet rewarding market for both domestic and international investors.

A-Shares

A-shares are Renminbi (RMB)-denominated shares of companies listed on the Shanghai or Shenzhen Stock Exchanges. Historically, these shares were limited to Chinese citizens and institutions, but thanks to programs like the Qualified Foreign Institutional Investor (QFII) scheme, the Renminbi Qualified Foreign Institutional Investor (RQFII) scheme, and the Stock Connect program, foreign investors can now access A-shares under specific conditions.

B-Shares

B-shares are shares issued by Chinese companies that are traded in foreign currencies. On the Shanghai Stock Exchange, B-shares are denominated in U.S. dollars, while in Shenzhen, they are traded in Hong Kong dollars (HKD). Unlike A-shares, B-shares are open to both domestic and foreign investors.

H-Shares

H-shares are shares issued by mainland Chinese companies but are listed and traded on the Hong Kong Stock Exchange (HKEX) in Hong Kong dollars. These shares are fully accessible to international investors and provide a way to invest in Chinese companies without the restrictions present in mainland markets.

N-Shares

N-shares are shares of Chinese companies listed on foreign stock exchanges, primarily in the United States, and traded in U.S. dollars. These companies are typically incorporated outside of China, often in the Cayman Islands, but generate most of their revenue from Chinese operations.

Some notable N-shares include Alibaba, Baidu, JD.com, and Pinduoduo Inc. 

Red Chip Shares

Red chip shares are issued by companies incorporated outside of mainland China but are listed on the Hong Kong Stock Exchange. These companies are typically controlled or influenced by the Chinese government, often serving strategic sectors. Red chips are traded in Hong Kong dollars and are accessible to global investors.

P Chip Shares

P chips shares, like red chips, are shares of companies that are incorporated outside mainland China and listed on the Hong Kong Stock Exchange. However, P chips are typically privately owned and operate in various industries, offering international investors access to some of China’s most dynamic private companies.

Here's how you can buy China stocks in Malaysia

Malaysian investors have several avenues to access China's booming stock market. From online platforms to more sophisticated institutional routes, here’s how you can buy China stocks from Malaysia.

1. Foreign Brokers Regulated by the Securities Commission Malaysia

Online brokerages have simplified access for Malaysian investors to both local and international markets, including Chinese stocks. Some platforms provide direct access to China-listed shares, while others offer indirect exposure through foreign-listed shares or ETFs.

Four regulated online brokers—Moomoo, FSMOne, M+ Global, and Rakuten Trade—make it easy to invest in major Chinese companies listed abroad, particularly in the U.S.

2. Foreign Brokers Not Licensed by Securities Commission Malaysia

Global brokers like Interactive Brokers, Saxo Bank, eToro, Tiger Brokers, and TradeStation Global offer Malaysian investors access to both U.S.-listed Chinese companies (N-shares) and mainland-listed A-shares.

However, some of these international platforms, including TD Ameritrade, eToro, and Tiger Brokers, are listed on the Securities Commission Malaysia’s (SC) Investor Alert List, which identifies unauthorized platforms. 

While being on the list doesn't necessarily imply fraud, it does indicate that these brokers are not licensed or approved by the SC, and the SC advises caution when using such platforms. Many of these brokers, though, are regulated by reputable international authorities, such as the Monetary Authority of Singapore or the U.S. Securities and Exchange Commission (SEC), providing a level of trustworthiness.

3. Domestic Brokers

Some Malaysian stockbrokers offer a convenient way to invest in China’s stock market by connecting with U.S. and international brokers, acting as intermediaries to facilitate your trades. For example, Maybank allows Malaysian investors to trade U.S.-listed China stocks as well as gain direct access to China A-shares via the Stock Connect program. 

While domestic brokers provide reassurance with local oversight, they may come with certain limitations. Depending on the brokerage firm, you might face restrictions on the range of investment vehicles available or the total number of trades you can execute.

Additionally, brokerage fees, currency conversion charges, and other costs can add up, potentially making investing more expensive than through some international brokers. It’s essential to carefully review the fee structure and any limitations before opening an international trading account with a domestic broker.

4. Via Stock Connect Programs

The Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect programs are the most popular means for foreign investors to trade China A-shares. These schemes link the Hong Kong Stock Exchange with mainland China’s exchanges, allowing international investors to buy and sell A-shares without needing special licenses.

For Malaysian investors, using brokers that offer access to the Stock Connect programs is a straightforward way to invest in mainland Chinese companies. Most online brokerages provide investors with the access to Stock Connect to trade A-shares.

5. Through ETFs

Exchange-Traded Funds (ETFs) offer a convenient way to gain diversified exposure to Chinese stocks without the complexity of buying individual shares. Many Malaysian brokerages provide access to ETFs that track major Chinese indices, such as the CSI 300 or the Hang Seng China Enterprises Index. These ETFs offer exposure to a basket of China’s top companies, making them an efficient tool for investors looking to capitalize on China’s growth across various sectors.

For example, you could invest in ETFs that focus on Chinese tech companies, green energy, or consumer goods, giving you broad market exposure with minimal effort.

6. QFII and RQFII Programs

The Qualified Foreign Institutional Investor (QFII) and Renminbi Qualified Foreign Institutional Investor (RQFII) programs allow licensed foreign institutions to access China’s stock markets directly. While these programs have become more flexible, they are primarily intended for institutional investors, meaning they are less accessible to individual retail investors. However, if you manage or invest through a licensed entity, this could be a viable option for gaining access to A-shares.

7. Open an Account with a Hong Kong-Based Broker

Opening a brokerage account with a Hong Kong-based broker is another option for Malaysian investors seeking to access mainland Chinese markets. Many brokers, such as Boom Securities, allow for remote account opening online or through the mail, eliminating the need to travel to Hong Kong.

These brokers often provide access to both Hong Kong-listed H-shares and mainland China A-shares via Stock Connect, offering a broader range of investment options.

8. Invest in ETFs or ADRs

If direct access to Chinese stock exchanges isn’t ideal for you, investing in Exchange-Traded Funds (ETFs) or American Depositary Receipts (ADRs) is another great way to gain exposure to Chinese companies.

• ETFs: U.S.-listed ETFs that track Chinese indices can be bought through most Malaysian brokers. These ETFs provide diversified exposure to China’s economy, spreading risk across multiple companies and sectors.
• ADRs: Many Chinese companies, like Alibaba and Baidu, issue ADRs on U.S. exchanges, which can be traded just like any other U.S. stock. Buying ADRs allows you to invest in Chinese companies without needing direct access to Chinese exchanges.

One of the most efficient ways to invest in China ETFs with low fees is through StashAway’s flexible portfolio. This robo advisor allows you to customize your portfolio by adjusting your exposure to various asset classes. StashAway offers access to the iShares Core MSCI China ETF, which provides exposure to large- and mid-cap Chinese companies, giving you an easy and cost-effective way to tap into China’s growth potential.

Exploring U.S.-listed ETFs that tracks China stocks

For investors looking to gain exposure to China’s growing economy, U.S.-listed ETFs offer an accessible and diversified way to invest in Chinese stocks. These ETFs provide access to broad markets, specific sectors, or even themes that are central to China’s development. Here's an in-depth look at the key categories of U.S.-listed ETFs that track Chinese stocks and some of the top options within each category.

1. Broad Market ETFs

Broad market ETFs provide exposure to a wide range of Chinese companies across multiple industries, allowing investors to participate in China's overall economic growth.

• iShares MSCI China ETF (MCHI): One of the most popular ETFs for broad exposure, MCHI tracks the performance of the MSCI China Index, which includes large and mid-sized Chinese companies across various sectors.
• SPDR S&P China ETF (GXC): This ETF tracks the S&P China BMI Index and offers diversified exposure to both large- and mid-cap Chinese companies, making it a good option for those looking for a broad representation of the Chinese economy.

2. A-Shares Focused ETFs

A-shares are stocks of mainland Chinese companies listed on the Shanghai and Shenzhen stock exchanges. These ETFs specifically target A-shares, which were once difficult for foreign investors to access but have become more available through ETFs.

• Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR): ASHR offers direct access to the CSI 300 Index, which includes the top 300 stocks listed on the Shanghai and Shenzhen stock exchanges, giving investors a pure play on China's A-shares market.
• KraneShares Bosera MSCI China A 50 Connect Index ETF (KBA): This ETF tracks the top 50 A-shares listed via the Stock Connect program, offering exposure to some of China’s largest and most influential companies within the mainland.
• iShares MSCI China A ETF (CNYA): CNYA provides exposure to a broad range of A-shares companies, tracking the MSCI China A Inclusion Index, which includes a more diversified mix of companies listed in Shanghai and Shenzhen.

3. Large-Cap Focused ETFs

For investors seeking exposure to China’s largest and most established companies, large-cap focused ETFs concentrate on big players that dominate their respective industries.

• iShares China Large-Cap ETF (FXI): One of the most well-known China-focused ETFs, FXI targets the largest companies listed in China, many of which are state-owned enterprises. It tracks the FTSE China 50 Index, heavily weighted towards financials and telecommunications.

4. Internet and Technology Sector ETFs

China's booming technology and internet sectors have attracted global attention, making sector-specific ETFs a popular choice for investors looking to capitalize on the growth of Chinese tech giants.

• KraneShares CSI China Internet ETF (KWEB): KWEB focuses on China’s internet and e-commerce sectors, including giants like Alibaba, Tencent, and JD.com. It’s one of the most popular ETFs for gaining targeted exposure to the fast-growing internet space.
• Invesco China Technology ETF (CQQQ): This ETF tracks the performance of technology stocks listed in Hong Kong and other exchanges, with a strong focus on internet services, software, and hardware companies.

5. Thematic ETFs

Thematic ETFs are designed to focus on specific trends or themes driving China’s economy. These funds target companies in sectors like consumer goods, renewable energy, or those that are privately owned.

• WisdomTree China ex-State-Owned Enterprises Fund (CXSE): CXSE offers exposure to Chinese companies that are not state-owned, which can appeal to investors looking for more independent firms with potentially higher growth potential. This ETF avoids government-controlled companies, giving a different perspective on China's economy.

6. Other Specialized ETFs

There are also more niche ETFs that focus on specific strategies or specialized segments of the Chinese market.

• First Trust China AlphaDEX Fund (FCA): FCA uses a quantitative strategy to select Chinese stocks that are expected to outperform the broader market, providing a more active approach to investing in China.
• Franklin FTSE China ETF (FLCH): FLCH tracks the FTSE China Index, offering broad exposure to large- and mid-cap Chinese stocks with a focus on diversification across sectors.
• Pacer CSOP FTSE China A50 ETF (AFTY): This ETF targets the top 50 A-shares listed in mainland China, offering investors a concentrated play on some of the largest companies in the Chinese market.

Understanding the risks of investing in China stocks

Investing in China’s stock market presents unique opportunities, but it also carries specific risks that investors need to be aware of. From regulatory unpredictability to geopolitical tensions, these risks can significantly impact returns. 

1. Regulatory Risks

China's regulatory environment is often unpredictable, with the government frequently intervening in the private sector. Arbitrary government crackdowns on industries—such as the tech crackdown on companies like Alibaba and Tencent—highlight the potential for sudden policy shifts that can significantly impact stock prices. Nationalization of private companies or the imposition of strict regulatory controls can also dampen investor confidence.

For example, in 2021, the Chinese government’s crackdown on the education sector wiped out billions in market value as new regulations prohibited for-profit tutoring . Similarly, the nationalization rumors surrounding Ant Group sparked concerns about state control over private enterprises .

Moreover, there is a lack of transparency in how these regulations are formulated and enforced. The restrictions on foreign ownership—seen in industries deemed sensitive by the government—add another layer of complexity for foreign investors.

2. Market Volatility

China's stock markets are volatile. They often experience sudden swings driven by policy shifts, economic data, and investor sentiment. This volatility can be unpredictable, and retail investors often dominate the market, which further amplifies these swings.

In recent years, Chinese stocks have shown sign of volatility due to various factors, such as regulatory changes, geopolitical tensions, and the government's tightening of regulations around data security and foreign listings .

3. Accounting and Transparency Issues

Chinese companies face criticism for their less stringent accounting standards compared to Western markets. This lack of transparency in financial reporting can make it difficult for investors to verify the accuracy of company disclosures. In some cases, this has led to significant discrepancies between reported earnings and actual financial health.

Several high-profile cases, such as the Luckin Coffee scandal, where the company admitted to fabricating over $300 million in sales, have raised concerns about the reliability of financial statements from Chinese companies .

4. Geopolitical Risks

Geopolitical tensions between China and other countries, particularly the U.S., present substantial risks for investors. Trade disputes, economic sanctions, and political conflicts can directly impact Chinese companies’ performance and their access to foreign markets.

The ongoing U.S.-China trade war has led to tariffs, supply chain disruptions, and a slowdown in global economic activity, which has negatively impacted many Chinese companies. Additionally, rising political tensions around Taiwan and military activities in the South China Sea continue to weigh on investor sentiment .

5. Corporate Governance Concerns

Corporate governance in China often differs significantly from Western norms. Many Chinese companies use Variable Interest Entities (VIEs) to bypass restrictions on foreign ownership. This structure can limit shareholder rights and protections, making it difficult for investors to have a say in company decisions or to seek recourse if something goes wrong.

The VIE structure has raised concerns in industries such as tech, where foreign ownership is restricted. These entities operate in a legal gray area, leading to uncertainty about their long-term viability .

6. Delisting Risks

Chinese companies listed on U.S. exchanges face the risk of delisting due to regulatory disputes between the U.S. and China. Disagreements over auditing standards have put several Chinese firms at risk of being removed from U.S. stock exchanges, which could hurt investor returns.

For example, the U.S. passed legislation in 2020 that could force Chinese companies off American exchanges if they do not comply with U.S. audit requirements .

7. State Intervention

The Chinese government maintains significant influence over the operations of many companies, particularly state-owned enterprises (SOEs). The state’s involvement can range from direct control to more subtle forms of influence, such as mandating certain business decisions or favoring SOEs over private enterprises.

This state intervention can sometimes lead to decisions that prioritize national interests over shareholder profits, as seen in industries like energy, telecommunications, and financial services 

Next steps for Malaysian investors

Now that you have a comprehensive understanding of how to invest in China’s stock markets, it’s time to take actionable steps to incorporate these opportunities into your portfolio. Here’s what you can do next:

1. Open a Brokerage Account: Whether you choose a domestic broker like or an international broker for U.S.-listed Chinese stocks or A-shares via stock connect, start by setting up an account that best suits your investment needs.
2. Diversify with ETFs: If you prefer lower risk, explore ETFs that provide exposure to the Chinese market, such as broad-market, sector-specific, or thematic ETFs. These can be a good way to enter the market without the volatility associated with individual stocks.
3. Diversify Across Markets: It’s essential not to concentrate all your investments in one market. While China offers immense growth potential, balancing your portfolio with exposure to other markets like the U.S. and Malaysia can help mitigate risks. This diversification ensures that your portfolio is not overly reliant on a single economy or region, protecting you from localized downturns.
4. Evaluate Risk Tolerance: Assess your risk tolerance before diving into China’s stock market. Consider factors such as regulatory unpredictability, geopolitical risks, and market fluctuations, and balance these with stable assets in your portfolio.
5. Monitor Economic Trends: Stay informed about economic and regulatory changes in China and globally that could impact your investments. Keeping an eye on market news and developments will help you make timely adjustments to your strategy.

By taking these steps and ensuring diversification across different stock markets, you can build a more resilient and balanced portfolio that taps into China’s growth while managing potential risks.