Chinese alphabet soup

Recognition and protection of shareholders’ rights has rarely been a top priority for senior management of emerging-market corporates. The lack of any serious attention to shareholder rights in China is further hindered by an alphabet soup mix of shareholder classes – each with its own complex set of regulations. Although many emerging equity markets operate under foreign ownership restrictions and two-tiered share ownership structures, the Chinese system is perhaps the most elaborate. More important, proposals to attempt radical reform of the regulatory framework – such as the elimination of an entire class of shares – might hit foreign equity holders with an immediate loss, thus injecting into the market even more uncertainty about the near-term outlook for increased foreign participation. Here are some of the most commonly used market terms.