China-Switzerland Stock Connect — expanding access to investment opportunities and overseas capital

Acuity Knowledge Partners
4 min readSep 12, 2022


Published on August 23, 2022 by Avishek Suman

Executive summary

The China-Switzerland Stock Connect was launched in late July with four Chinese firms listing their global depository receipts (GDRs) on the Swiss Stock Exchange. The framework presents a number of opportunities for Chinese companies looking for global capital and international investors trying to find ways to invest in Chinese firms. China, however, remains a challenging market, and global fund managers must devise innovative ways to conduct comprehensive research on Chinese companies and the Chinese market.

China-Switzerland Stock Connect is launched; four Chinese firms list their GDRs

On 28 July 2022, China and Switzerland launched a new Stock Connect programme to facilitate the cross-listing of GDRs on participating exchanges. This essentially means Chinese companies can now list their GDRs on SIX (Switzerland’s exchange operator) and Swiss companies can be listed on the Shanghai and Shenzhen Stock Exchanges. GDRs represent shares in foreign stock and are themselves tradable securities.

Four Chinese companies, namely GEM, Gotion High-tech, Keda Industrial Group and Ningbo Shanshan, listed their GDRs to raise USD1.6bn at the launch. There are more than 10 Chinese companies lined up to list on the Swiss Exchange as part of the programme.

Chinese companies intending to list their GDRs on the Swiss Exchange must maintain information uniformity by disclosing important facts concurrently in Switzerland and China. They also need to confirm compliance with domestic corporate governance norms. Additionally, Chinese companies listing their GDRs on the SIX Swiss Exchange must disclose insider transactions.

Source: Recreated from SIX Group website

China is increasingly connecting its domestic capital markets with the world through its various “Connect programmes”

In November 2014, China introduced its first Stock Connect, a cross-boundary investment channel between Hong Kong (HK) and Shanghai. It was expanded to cover the Shenzhen Stock Exchange in late 2016. Today, more than half of the companies listed in HK are from the Chinese mainland and represent 78% of its market capitalisation. In July 2022, exchange traded funds (ETFs) were included in the China-HK Stock Connect programme. This would permit investors to trade in eligible ETFs listed on the mainland and HK Stock Exchanges.

In 2017, China launched Bond Connect, allowing global investors to invest in China’s bond market. In 2019, the Shanghai-London Stock Connect was launched to facilitate eligible companies listed on each stock exchange to issue depository receipts on the other. In October 2021, China initiated Wealth Management Connect that allows mainland residents from nine cities of its Greater Bay Area (GBA) to invest in financial products issued in HK and Macao. Similarly, wealthy residents from HK and Macao are permitted to invest in products distributed in the GBA.

Chinese companies will increasingly use the Stock Connect programmes for raising foreign capital

Chinese companies listed in the US are fearing potential delisting due to increased regulatory requirements in the US. These companies face even stricter restrictions and regulatory requirements if they try to list their shares in the mainland. As a result, listing in HK to benefit from the China-HK Stock Connect is a viable option. The HK Stock Exchange revealed in its 1H22 presentation that the pipeline of mainland-based companies’ IPOs was very strong. Internet behemoth Alibaba Group Holding Limited, for example, is in the process of listing in HK while online entertainment firm Bilibili Inc. is converting from secondary to primarily listing in HK.

The China-Switzerland Stock Connect provides another alternative. Some of the Chinese companies that were considering listing in HK are now turning to GDR listing in Switzerland. International law firm Baker McKenzie, which advised the first four Chinese companies on listing on the SIX Swiss Exchange, confirmed that the Chinese authorities had approved the GDR listing in only a few weeks. China’s support of the China-Switzerland Stock Connect is a big relief for Chinese companies looking for overseas capital. China had earlier forced Alibaba to cancel Ant Group’s IPO and initiated an investigation of DiDi, just a few days after DiDi’s IPO in New York.

The China-Switzerland Stock Connect opens avenues for global investors and investment banks

The China market attracts international investors given its sheer size. China is likely to post decent GDP growth in the coming months, after growth bottomed out in the second quarter of 2022. The country is also home to interesting companies riding on the wave of technological advancement, a mammoth network of infrastructure and substantial domestic consumer demand.

The China-Switzerland Stock Connect provides interested global investors with direct access to Chinese companies. Given that Chinese GDR issuers have to comply with the regulatory requirements of the SIX Swiss Exchange, international investors deem the investment environment familiar and safe. As more and more Chinese firms list their GDRs on the Swiss Stock Exchange, it should present opportunities for local and international investment banks as well.

How Acuity Knowledge Partners can help

While there are a number of positives, global investors still find the China market difficult to navigate. International investors looking for meaningful exposure to Chinese equities must not only conduct customised research on Chinese companies, but also closely track policy changes. This, however, is difficult given the language barrier.

Many fund managers are, therefore, turning to dependable third-party research firms such as Acuity Knowledge Partners to closely track the China economy. We have been serving in Beijing for more than a decade, and our talent pool of bilingual analysts can act as an extension of our client’s onshore research team to conduct bespoke research on Chinese companies and the macro environment.

About the Author

Avishek Suman manages the Investment Research business in Acuity Knowledge Partners, Beijing. He has close to 19 years of work experience in research, including 14 years in Acuity Knowledge Partners. Prior to assuming this responsibility in Beijing, Avishek served as Delivery Manager for buy-side and sell-side clients.

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