Chinese Depositary Receipts (CDRs) vs ADRs: how the two structures differ

Search for "Chinese depositary receipts" and you will mostly find pages about Chinese ADRs — American Depositary Receipts issued over Chinese companies. They are not the same thing. A Chinese Depositary Receipt (CDR) is a distinct, separately regulated instrument that runs in the opposite direction: it brings a company incorporated or listed outside mainland China into the mainland market, rather than bringing a Chinese company out to foreign investors.

The two structures are built from the same four moving parts — an issuer, a depositary bank, a custodian bank and the receipt holders — which is exactly why they are so easy to confuse. This guide sets out how the parts are wired in each case, and who has actually used which.

The two instruments at a glance

What a Chinese Depositary Receipt actually is

China spent three decades not allowing overseas-incorporated companies to float in its own market. That was a problem for so-called red-chips — businesses that operate in China but whose listed holding company is incorporated somewhere else, typically the Cayman Islands. They could list in New York or Hong Kong; they could not list at home.

In March 2018 the China Securities Regulatory Commission issued a document allowing red-chips to issue depositary receipts domestically on an experimental basis, which the General Office of the State Council then forwarded for implementation. The CSRC followed with the Administrative Measures for the Issuance and Trading of Depositary Receipts (for Trial Implementation) in June 2018, and the Shanghai and Shenzhen exchanges issued their own listing and trading measures the same month.

The venue for CDRs then widened in steps. Usage was ring-fenced to the Shanghai STAR Board when it was established in June 2019, extended to the Shenzhen ChiNext Board in June 2020, to the Beijing Stock Exchange in September 2021, and to the Shanghai and Shenzhen Main Boards in March 2023.

The four parties, and where they sit

A CDR is modelled on its global counterparts and involves the same four parties: the issuer, a depositary bank, a custodian bank and the investors. The issuer signs a depositary agreement with a China-based depositary bank. That depositary appoints a custodian bank local to the issuer to receive and safekeep the underlying shares. Once the custodian confirms receipt, the depositary issues the CDRs to investors in the Chinese market.

This is the mirror image of an ADR, where a US depositary bank appoints a custodian in the company's home market. The geography of the two banks is the single cleanest way to tell the structures apart: in an ADR the depositary is American and the custodian is foreign; in a CDR the depositary is Chinese and the custodian is foreign to China.

Rights, dividends and voting

Under the CDR mechanism, holders have voting rights and economic interests equal to those of holders of the underlying shares. The custodian bank is the registered owner of those shares — the holder of legal title — while the depositary bank passes dividends through to CDR holders in the local currency, and distributes shareholder meeting notices and voting instructions so that holders can vote the shares their receipts evidence.

An ADR works the same way in outline: the depositary holds the shares through its custodian, converts dividends into US dollars, and passes them to holders net of the depositary's fees. Those fees are disclosed in the Form F-6 registration statement filed with the SEC; the SEC's own investor bulletin gives an illustrative range of roughly $20 to $50 per 1,000 ADRs.

The ADR side, in one paragraph

An ADR is a certificate issued by a US depositary bank representing shares of a non-US company held outside the United States. Programmes come in tiers. Level I is the only type that may be unsponsored — created by a broker-dealer without the company's participation — and trades only over the counter; Form F-6 is the only registration required. Level II establishes a listing on a US exchange but may not be used to raise capital, and obliges the company to register and file annual reports on Form 20-F. Level III both establishes a listing and raises capital, via a Form F-1, F-3 or F-4 registration statement. The ratio of ordinary shares to each receipt is set by the depositary and varies from programme to programme. The long version is in Chinese ADRs explained.

Settlement and trading rules

Because the receipt is a local security in each case, it settles and trades under local market conventions rather than the home market's. A US-listed ADR settles through the US clearing system, which moved to a one-business-day (T+1) standard settlement cycle on 28 May 2024 under the SEC's amendments to Rule 15c6-1(a). US exchanges apply no fixed daily percentage price limit.

A CDR trades under mainland rules instead. Mainland shares operate a "T+1" trading rule under which stock bought on one day can only be sold on the following trading day. On the STAR Board there is no price limit for the first five trading days after listing, and a 20% daily price fluctuation limit thereafter — a hard band with no equivalent in the US market.

Fungibility and conversion

With an ADR, the receipt and the ordinary share stay economically tied because the depositary can issue new receipts against deposited shares and cancel receipts to release shares. That two-way mechanism is what keeps an ADR price tracking its home line rather than floating free.

On the CDR side there are two regimes and they behave differently. Depositary receipts issued under the Stock Connect scheme between mainland and overseas exchanges are, in the Shanghai Stock Exchange's own description, fungible with the shares: the scheme converts shares from one market into receipts on the other so investors can trade locally, and eligible domestic and overseas brokers may apply for a licence to conduct that cross-border conversion.

The red-chip CDRs issued through a domestic Chinese IPO are a different proposition. There the receipts were created in the offering itself rather than over an existing foreign listing, so the shares behind them do not trade anywhere else — there is no second market for a conversion to arbitrage against.

Who can hold them

This is where the two instruments diverge most sharply for an international reader. An ADR is available to anyone with an ordinary brokerage account that can reach US markets; that accessibility is the entire point of the structure.

A CDR is not. Mainland venues apply investor-suitability requirements: an individual trading on the STAR Board needs a securities account balance of no less than 500,000 yuan and more than 24 months of securities trading experience. The Shanghai Stock Exchange separately notes that CDR traders under its Stock Connect depositary receipt scheme are subject to investor-suitability requirements. For a non-mainland investor, exposure to a mainland-listed line — CDR or ordinary A-share — runs through Stock Connect, the Qualified Foreign Investor route or a fund, not through the receipt itself. Those channels are covered in how to buy Chinese stocks and in Southbound Stock Connect.

Who lists where: what the record shows

The clearest way to understand the difference between the two structures is to look at how much each has actually been used.

CDRs have been used sparingly. From the establishment of the SSE STAR Board on 13 June 2019 to 31 December 2023, the board admitted 559 issuers. Three of those were red-chips, and only one of the three raised money by issuing CDRs: Ninebot Limited, stock code 689009. The same study counted 536 Chinese companies quoted on the Shenzhen ChiNext Board as at 31 December 2023 and found none of them acting as a CDR issuer.

Ninebot — the Beijing company that owns the Segway brand — is therefore the reference case. It is incorporated in the Cayman Islands, uses a variable interest entity structure, and listed its CDRs on the STAR Market on 29 October 2020, becoming the first company with a VIE structure to issue CDRs in China. The company issued roughly 7.04 million Class A ordinary shares to Industrial and Commercial Bank of China, which in turn sold the resulting CDRs to domestic investors at a ratio of ten CDRs to one ordinary share.

ADRs, over the same window, were used heavily. Between 13 June 2019 and 31 December 2023, 109 red-chip companies went public on the NYSE or NASDAQ, and 64 of them issued ADRs. That contrast — one CDR issuer against sixty-four ADR issuers — is the practical answer to "which structure do Chinese companies use?"

The Stock Connect depositary receipt schemes have run mostly the other way. In February 2022 the CSRC issued the Provisions on the Supervision and Administration of Depository Receipts under the Stock Connect Scheme between Domestic and Overseas Stock Exchanges, widening the mechanism from the London Stock Exchange main board to overseas markets including London, Germany and Switzerland. The scheme is two-directional: overseas-listed companies may list CDRs on the SSE Main Board, and Shanghai-listed A-share companies may list Global Depositary Receipts abroad. In practice the westbound GDR leg has carried the traffic — Huatai Securities was the first GDR issuer when Shanghai–London Stock Connect launched in June 2019, and by 15 March 2024, 17 Chinese companies had listed GDRs on SIX Swiss Exchange, nine of them in 2022 and eight in 2023.

Why a Chinese issuer would use a CDR

The motivation is structural rather than promotional. A red-chip's listed entity is incorporated offshore, and for three decades that blocked a domestic float outright. The CDR is the instrument that removes the block: it gives an overseas-incorporated company a route to go public in China without having to change its corporate structure — no redomiciliation, no unwinding of an offshore holding company or a VIE.

It also gives the company access to a domestic investor base and a renminbi-denominated valuation, alongside — not instead of — whatever overseas listing it already has. What the record above shows is that very few companies have taken the route, which is a fact about uptake, not about the mechanism.

If you hold a US-listed Chinese ADR

The most common reason people arrive at the letters "CDR" is a worry about what happens to a US-listed Chinese holding. It is worth being precise: a CDR is not the answer to that question. The mechanism was built to bring overseas-incorporated companies into the mainland market, and it has been used once on the STAR Board. It is not a second venue that US-listed Chinese companies fall back on.

The venue that does play that role is Hong Kong — a full secondary or dual-primary listing under HKEX rules, with a defined depositary conversion path. Two guides cover that ground: Chinese ADR delisting risk sets out what a US delisting would and would not do to your shares, and the HKEX conversion path covers the mechanics, timeline and costs of moving an ADR to a Hong Kong line. If you are deciding which venue to buy in the first place, ADR vs H-share vs A-share compares the three you can actually reach.

Companies covered

Everything above about the ADR side of the comparison applies to the US-listed Chinese companies in the WealthyTec universe — these are depositary receipts issued by a US bank, not CDRs. Each company page carries a live quote, price chart, revenue and EPS history, and any second listing venue recorded in our dataset.

Frequently asked questions

Sources

External facts cited above: Shanghai Stock Exchange, "Depository Receipts under the Stock Connect — Introduction" — the February 2022 CSRC Provisions, the London/Germany/Switzerland scope, the two-directional CDR and GDR business, fungibility of the receipts and the shares, cross-border conversion licensing and CDR investor-suitability requirements; Fa Chen & Lerong Zhao, "Introducing Chinese depositary receipts to accommodate red-chips", Asia Pacific Law Review — the March 2018 CSRC document and State Council forwarding, the June 2018 trial measures, the STAR/ChiNext/BSE/Main Board venue expansion, the four-party structure, legal title and voting, and the issuer counts to 31 December 2023 (559 STAR issuers, three red-chips, one CDR issuer; 536 ChiNext companies, none; 109 red-chip US IPOs, 64 with ADRs); SEC, Investor Bulletin: American Depositary Receipts — sponsored and unsponsored programmes, Levels I–III, Form F-6, F-1/F-3/F-4 and Form 20-F, and the illustrative depositary-fee range; SEC, on the T+1 settlement cycle operative 28 May 2024; Deloitte China on the Ninebot listing and Caixin Global on the offering — the 29 October 2020 STAR Market listing, the Cayman incorporation and VIE structure, ICBC, the 7.04 million Class A shares and the ten-to-one ratio; SIX Swiss Exchange on the first Chinese GDR listings — the 28 July 2022 debut, with the 17-issuer count as at 15 March 2024 (nine in 2022, eight in 2023) from subsequent SIX reporting; SSE STAR Market rules summary — the 500,000-yuan and 24-month investor-suitability thresholds and the five-day/20% price-limit regime. Rules and market data change; verify current details before acting.