Skip to content
SuperMoney logo
SuperMoney logo

What are Chinese Depositary Receipts (CDRs)? Definition, Advantages & FAQs

Last updated 03/19/2024 by

Alessandra Nicole

Edited by

Fact checked by

Summary:
Chinese Depositary Receipts (CDRs) represent foreign equity traded on Chinese exchanges, akin to American depositary receipts (ADRs) for non-U.S. companies on American exchanges.
Chinese Depositary Receipts (CDRs) serve as a pivotal tool in facilitating the trading of foreign stocks on Chinese exchanges. This article delves into the intricacies of CDRs, elucidating their purpose, structure, and impact on the Chinese financial landscape.

Understanding Chinese depositary receipts (CDRs)

What are depositary receipts?

Depositary receipts, with their roots tracing back to the 1920s in the United States, are certificates issued by custodian banks to represent equity in foreign companies. These financial instruments enable investors to hold shares listed on foreign exchanges via intermediaries like American depositary receipts (ADRs) in the U.S. market.

Chinese depositary receipts (CDRs)

CDRs, akin to ADRs, are a class of depositary receipts traded on Chinese stock exchanges, symbolizing pools of foreign equity. They offer Chinese investors an avenue to trade shares of non-Chinese entities domestically, aiming to attract capital back to China’s burgeoning market.
“`html
WEIGH THE RISKS AND BENEFITS
Here are the pros and cons of Chinese Depositary Receipts (CDRs) to consider.
Pros
  • Provide domestic investors access to overseas-listed Chinese companies.
  • Allow Chinese tech giants to list on mainland exchanges, driving economic growth.
  • Offer potential for substantial market growth and investment opportunities.
Cons
  • Government regulations and capital controls may restrict foreign ownership and investment.
  • Complex legal structures and regulations can pose challenges for both firms and investors.
  • Risks associated with fluctuations in foreign exchange rates and geopolitical tensions.

Frequently asked questions

How do CDRs benefit Chinese investors?

CDRs empower Chinese investors by granting them access to shares of foreign companies listed overseas, thereby broadening their investment opportunities and potentially boosting returns.

What regulatory framework governs CDR issuance?

CDR issuance in China is subject to regulations set forth by the China Securities Regulatory Commission (CSRC), ensuring transparency, fairness, and investor protection in the process.

Key takeaways

  • Chinese Depositary Receipts (CDRs) enable Chinese investors to trade shares of non-Chinese companies domestically.
  • CDRs play a crucial role in attracting foreign capital to China’s market, bolstering economic development.
  • Regulated by the China Securities Regulatory Commission (CSRC), CDRs adhere to stringent guidelines to ensure market integrity and investor confidence.

Show Article Sources

Share this post:

You might also like