The regulation of the dual-class share structure in China: A comparative perspective

Longjie Lu*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract / Description of output

The last few years have observed many Chinese enterprises listing on US exchanges, where dual-class shares are permitted. To be competitive, Hong Kong and Singapore lifted the ban on dual-class shares, which eventually impelled China to join the race in 2019 by introducing dual-class shares to a new section on the Shanghai Stock Exchange (SSE)-the Sci-Tech Innovation Board. The dual-class share structure has both pros and cons. It can facilitate business development, whereas it may also be detrimental to investor protection. To deal with the downside, the operation of dualclass shares is usually subject to regulation. The USA and Hong Kong have adopted a light-touch and a heavy-handed regulatory approach, respectively. The differences between them are embedded in their market structures and the legal rules of investor protection. In terms of these two aspects, China is closer to Hong Kong rather than the USA. The current regulation in China, which is based primarily on the heavy-handed approach, is in the right direction. Nevertheless, the article argues that since there are flaws in the current regulation and the law of investor protection in China remains weak, further steps are needed to better control the risks in the operation of dual-class shares.

Original languageEnglish
Pages (from-to)224-249
Number of pages26
JournalCapital Markets Law Journal
Issue number2
Publication statusPublished - 25 Apr 2020


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