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When reading upon the definition of Chinese B-shares, I have a question about the following piece of text:

The term B-shares refers to equity share investments in companies based in China. These shares trade on two Chinese stock exchanges: the Shanghai Stock Exchange and the Shenzhen Stock Exchange in mainland China. Shares are denominated in renminbi, which is the national currency of China, but settle in U.S. dollars (Shanghai) and Hong Kong dollars (Shenzhen). They are open to investment by individuals in China who have foreign currency accounts as well as foreign investors.

What does it mean for a share to "settle" in U.S. dollars?

2 Answers 2

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Shares are denominated in renminbi, which is the national currency of China, but settle in U.S. dollars (Shanghai) and Hong Kong dollars (Shenzhen).

That means that the prices you see are quoted in renminbi but you need to spend dollars when you buy them. There has to be a conversion between the two when the money exchanges hands.

They are open to investment by individuals in China who have foreign currency accounts as well as foreign investors.

This rule may limit the number of citizens of China who can invest.

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  • 1
    It is my understanding that converting a large amount of internal currency to a currency of use outside of China, is very difficult. Sep 21, 2021 at 14:26
  • @MichaelRichardson as has been typical of countries with collapsing economies, in the past, when the money for the conversion does not exist or has already been spent by corrupt politicians
    – user253751
    Sep 22, 2021 at 8:25
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Just to very directly answer the question from the title:

"Settling" a transaction means completing the transaction - in particular, once upon a time there might be a significant gap between agreeing to transact something and actually transferring the thing (and the money).

  • Jan 15: You and I agree to trade 1 share of Acme LLC for $20.
  • Jan 16: I put the share in the mail, and you put a check in the mail
  • Jan 18: We each receive the mail piece, and the transaction is now settled.

Nowadays there doesn't need to be a long time, since everything is electronic; but there is a delay for various technical (and legal) reasons. Commonly that delay is 2 business days, but it can vary. That both gives you some time to come up with the cash, and lets the company whose stock you purchased have some time for their bookkeeping.

See this article from Schwab, for example, explaining the delay in more detail, and this Investopedia article as well.

As a result, the question from the end of the OP - "What does this mean to settle in US dollars" - means that when you hand over the money for the stock, that operation occurs in US dollars, not renminbi.

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