H-shares: kick-starting 30 years of connectivity
Aug 22, 2023
10 mins

2023 marks the 30th anniversary of the first H-share listing in Hong Kong. When the H-share was introduced in the early 1990s, we knew it would be a major step forward for Hong Kong’s capital markets and also for Mainland state-owned enterprises. And without a doubt, it has fulfilled its role.

But we did not anticipate the level to which that H-share listing would kick-start 30 years of partnership, innovation and connectivity. H-share listings helped to shape and define Hong Kong’s future as one of the world’s leading international financial centres – and I am incredibly proud to have been there at the birth of this defining development.

Today, as we look to the future and the next exciting chapter in the growth of the region’s capital markets, it is important to look back at the journey that we have embarked on – on the incredible China growth story, on taking bold steps to promote connectivity and partnership and why we should always keep moving forward. I am excited about how our Connect Story will continue to develop.

H-share listings helped to shape and define Hong Kong’s future as one of the world’s leading International Financial Centres, and I am incredibly proud to have been there at the birth of this defining development.
The world in 1993

In the early 1990s, Hong Kong’s markets looked very different. 

Then, property and other local companies accounted for a significant portion of the market’s capitalisation. There was a need to diversify and broaden Hong Kong’s market, and to capture China’s booming economy. We knew then that we must strengthen Hong Kong’s position as a financial centre.

This was also at the time when the Central Government was determined to continue the successful reforms of the 1980s. Reforming state-owned enterprises had become a key area of focus.

I had spent years working closely with Chinese corporates. In the 1980s, I worked in China on a range of joint ventures between state-owned enterprises and international companies, and had seen first-hand the benefits, opportunities and possibilities that could come from alignment, knowledge-sharing and partnership.  

Building new connectivity was vital, and underpinning this was the high-level dialogues and collaboration taking place between the Hong Kong Securities and Futures Commission (SFC) and the Mainland authorities. Together, the two partners developed a pioneering framework for Mainland enterprises to list in Hong Kong, using Hong Kong’s established and respected rules.

A new partnership

That meant a new type of partnership, and I had the privilege of playing a part in building it. 

Over a period of 15 months, the Hong Kong team spent many weekends on the Mainland working with officials to develop a template for how the H-share listing would work.

We had to enshrine corporate governance provisions in the Articles of Association of companies applying to list in Hong Kong, which came to be known as the “Mandatory Provisions”. A listing applicant’s Articles of Association with the Mandatory Provisions would form part of the listing agreement, thus becoming the contract between the listed company and the stock exchange.

The path to implementing this new framework for H-share listings was not universally smooth. There was opposition and doubts in both the Mainland and Hong Kong. There were reservations about whether Mainland state-owned enterprises could meet the corporate governance standards required of listed companies. There were concerns that Mainland companies might adversely affect Hong Kong’s reputation as a financial centre. 

But there was also support from the market and investors, who welcomed this new chapter  –  a new asset class and the opportunity to diversify their portfolios.

We also had to make significant changes in Hong Kong in order to attract international investors to our market. Changes were made to our listing process to allow book-building and other features familiar in overseas markets but new to Hong Kong at the time. 

Caution amid the excitement

The development of H-share listings generated much excitement both here in Hong Kong and beyond. The proposed H-share asset class was to open up new opportunities for investors, diversify our markets and mark a new era in China’s economic reforms.

On their part, the state-owned enterprises that became listed companies in Hong Kong were proud of their listing status and were eager to prove that they could comply with the standards required in Hong Kong. They too, were keenly aware that they had the responsibility not to sully their reputation, Hong Kong’s reputation, as well as that of the state sector as a whole.

Tsingtao Brewery became the first H-share to list on our markets on 15 July 1993 and thus began the H-share story which opened a new chapter and set the path for decades to come.

Since then, 323 H-share companies have listed in Hong Kong, raising HK$2.9 trillion. Of those 323 companies, 307 have listed on the Main Board and 16 on GEM, with a total market capitalisation of HK$5.9 trillion.

In purely numerical terms, the growth of the H-share asset class has been remarkable, but its significance has been much more far-reaching and profound.

I am certain that, without H-shares, there would be no Connect. And I am certain that, without H-shares, Hong Kong and the Mainland’s journey over the last 30 years would look very different.
No H-shares, no Connect

H-share listings helped advance and accelerate the adoption of good corporate governance standards within the Mainland business community. 

This was particularly true for state-owned enterprises, with many gaining experience of international accounting standards, information disclosure requirements and good board practices.

The performance of H-share companies over the years attracted even greater interest from international investors seeking exposure to China’s growth story. 

I am certain that, without H-shares, there would be no Connect. And I am certain that, without H-shares, Hong Kong and the Mainland’s journey over the last 30 years would look very different. 

The H-share was foundational – it was the starting point of a Connect Story which has played out across markets, asset classes and boundaries. 

Strengthening Hong Kong’s position as a premier IFC

Since 1993, Hong Kong has risen up the ranks to 4th in the Global Financial Centre Index, and the number of companies listed on our markets has grown from 765 to 2,604 as of July 2023. It has been a journey and a story unparalleled anywhere else.

But that journey, in many ways, is only just starting. 

We have many more opportunities to look forward to. There remain many more opportunities to grow and develop the existing Connect programmes – and I’m excited, in particular, to see the possibilities for bringing international companies to list here in Hong Kong in the coming years, much in the way that Mainland companies came here when the H-share launched.

Sometimes the best way to celebrate something is to look back and harness the spirit that created it.  

As we celebrate the H-share, we at HKEX will remain resolute in our commitment to continue our partnerships. To drive our business and Hong Kong's markets forward. To connect China and the world for the prosperity of all. 

Here’s to another 30 years of connectivity!