Shanghai-London Stock Connect: Operating Mechanism, Opportunities, and Challenges

Journal of International Banking and Financial Law (2019), vol.34, pp.684-687

4 Pages Posted: 11 Jul 2019 Last revised: 15 Oct 2019

See all articles by Lerong Lu

Lerong Lu

The Dickson Poon School of Law, King's College London

Ningyao Ye

China University of Political Science and Law - School of Juris Master

Date Written: July 10, 2019

Abstract

Shanghai-London Stock Connect (SLSC) is an innovative cross-border financial markets listing and trading mechanism linking Chinese stock market with its British counterpart. It allows Chinese public companies to issue Global Depository Receipts (GDR) to be traded on the London Stock Exchange. Similarly, UK-listed companies can issue Chinese Depository Receipts (CDR) to obtain a secondary listing on the Shanghai Stock Exchange. SLSC enables British and international investors to purchase the shares of some of the best companies in the world’s second largest economy. The market scale of GDR amounts to $2.9 trillion while the size of the CDR market is predicted to exceed $800 billion, which could generate substantial revenues for investment banks and city law firms. The threshold of issuing either GDR or CDR is relatively high as issuers have to have a minimum market capitalisation of RMB 20 billion (US$2.92 billion). More than 260 of the 1,500 Shanghai-listed companies will be potentially eligible to participate in the project. On 17 June 2019, Huatai Securities, one of China’s largest brokerages, has become the first Chinese public company to be dual-listed on the LSE via the latest SLSC. Huatai raised $1.7 billion from selling 82.5 million GDRs to international investors. HSBC is said to be the first UK company to apply for a CDR listing in Shanghai. SLSC has raised multiple technical and regulatory challenges in relation to time difference, information disclosure, investor protection, cross-border financial supervision, as well as cross-border dispute resolution.

Keywords: China, Shanghai-London Stock Connect, Financial Regulation, Stock Market, Financial Law, Securities Regulation, Initial Public Offering, IPO, Chinese Depositary Receipt, CDR, Global Depositary Receipt, GDR, Shanghai Stock Exchange, London Stock Exchange

Suggested Citation

Lu, Lerong and Ye, Ningyao, Shanghai-London Stock Connect: Operating Mechanism, Opportunities, and Challenges (July 10, 2019). Journal of International Banking and Financial Law (2019), vol.34, pp.684-687, Available at SSRN: https://ssrn.com/abstract=3417502 or http://dx.doi.org/10.2139/ssrn.3417502

Lerong Lu (Contact Author)

The Dickson Poon School of Law, King's College London ( email )

Strand
London, WC2R 2LS
United Kingdom

HOME PAGE: http://www.kcl.ac.uk/people/lerong-lu

Ningyao Ye

China University of Political Science and Law - School of Juris Master ( email )

Beijing
China

HOME PAGE: http://flssxy.cupl.edu.cn/en/info/1009/1216.htm

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