Other than an elite few, not many foreigners are permitted to buy stock in a Chinese company on a Chinese stock market. But that will change soon. The Wall Street Journal is reporting today that China has approved a new plan to allow U.S. investors to indirectly access its stock markets. The move is being seen as an important step forward in opening China's markets to the international community.
Shaun Rein, managing director of the China Market Research Group in Shanghai, says the reason China has so far been reluctant to allow U.S. investors into its stock markets has to do with fundamental differences between the Chinese and American economies.
"The Chinese government has always prevented everyday Americans from buying equities in the Chinese stock markets because they're very scared about manipulation in the financial system, because they run a command economy, and they're not really prepared for fluctuation like we are in the United States," Rein says.
Currently, if an American investor wanted to place a bet on more Chinese growth, she might buy stock in a company that does a lot of business in China, such as Caterpillar.