The Guaranty Law of the PRC states that shares and shares of stocks that may be legally transferred may be pledged. If the shares are traded on stock exchanges, it is permitted to use them for a pledge. Important to note is that there must be a written contract between the pledgor and the pledgee as well as a registration at the relevant agency.
Non-listed foreign capital shares may be traded on B-share markets after approval, although pledging of them is restricted: 1. Promoter shares in a B-share company with foreign capital shares may not be transferred within three years after forming the company, and thus cannot be pledged. 2. If they are pledged, approval is needed from the foreign capital approval authority that approved the formation of the B-share company. Pledge registration must then be performed with the securities registration agency.
