From targeted technology restrictions to severe market fragmentation: the same Chinese company can carry very different risks depending on whether it is held as an ADR, Hong Kong share, A-share or ETF

The obvious reaction to the Sberbank experience is to ask whether China could one day present the same problem.

It is also the wrong way to formulate the question.

China is not Russia. Its role in global trade is vastly larger, its domestic financial markets are deeper, Hong Kong provides an international financial bridge, and Western companies, consumers and investors are entangled with the Chinese economy on a scale that would make broad financial separation extraordinarily consequential.

But none of those facts guarantees that every Chinese security will remain continuously accessible to every foreign investor under every political scenario.

The useful question is therefore not: Will China become another Russia?

It is: How would different types of political and financial restrictions interact with the particular way in which I hold Chinese assets?

That distinction removes the need to forecast a conflict over Taiwan, estimate election outcomes, guess government motives or pretend to assign precise probabilities to geopolitical events that remain deeply uncertain.

Instead, we can perform a financial stress test.

Start from today’s reality, not tomorrow’s worst case

As of September 2026, there is no general US prohibition on ordinary public investment in Chinese equities.

The US Outbound Investment Security Program identifies China, Hong Kong and Macau as countries of concern and restricts or requires notification of certain investments involving semiconductors, microelectronics, quantum information technologies and artificial intelligence. However, under the rules currently in force, qualifying investments in publicly traded securities are generally excepted. Treasury has specifically clarified that a publicly traded ADR can fall within that exception. U.S. Department of the Treasury

The regulatory framework is evolving. The COINS Act became law in December 2025 and requires Treasury to issue additional regulations, but Treasury states that the existing outbound-investment rules remain operative until those new regulations are adopted. U.S. Department of the Treasury

A separate US regime applies to specified Chinese Military-Industrial Complex Companies. This imposes restrictions on covered publicly traded securities for US persons but is not equivalent to a blanket freeze on Chinese securities. OFAC has explicitly said, for example, that under that regime US financial institutions are not required to block covered transactions and can in certain circumstances intermediate transactions between non-US persons. OFAC

That distinction is central to everything that follows.

“Sanctions on China” would not tell an investor enough.

Which companies?

Which investors?

Which transactions?

Which intermediaries?

Blocking or merely prohibiting purchases?

Existing holdings or new investments?

The legal mechanism matters at least as much as the headline.

China has already produced a market-access warning without a military crisis

The history of US-listed Chinese companies provides a useful example of how investability can change even without war or comprehensive financial sanctions.

The Holding Foreign Companies Accountable Act created a mechanism under which companies could eventually face US trading prohibitions if the Public Company Accounting Oversight Board could not properly inspect their auditors.

For a period, delisting risk became material for many Chinese ADRs.

In December 2022, however, the PCAOB vacated its previous determinations concerning inspection obstacles in mainland China and Hong Kong. The SEC therefore states that companies using those auditors will not be newly identified on that basis unless the PCAOB issues another adverse determination. SEC

The episode matters because it demonstrates a broader point:

market access can be disrupted by regulation long before governments reach anything resembling an asset freeze.

Investors who analyse only revenues, earnings and valuation may miss an entire category of risk.

What does it actually mean to own “Alibaba”?

Take Alibaba because its structure is relatively easy to illustrate.

A holder of BABA in New York owns American Depositary Shares. Alibaba states that each ADS represents eight ordinary shares.

A holder of 9988 in Hong Kong owns Hong Kong-listed ordinary shares.

The company states that the two are fully fungible and can normally be converted in either direction, generally within around two business days under normal circumstances. Alibaba Group

Economically, the two positions provide very similar exposure to Alibaba.

Operationally, they are not identical.

The US ADS route

Swiss investor
↓
broker
↓
US-listed ADS
↓
depositary structure
↓
underlying Alibaba ordinary shares

The Hong Kong ordinary-share route

Swiss investor
↓
broker / custodian
↓
Hong Kong exchange and clearing system
↓
Alibaba ordinary share

The ADS adds US market and depositary infrastructure.

The Hong Kong share removes that particular layer but increases direct dependence on Hong Kong’s securities infrastructure.

Neither structure escapes the issuer’s ultimate China-related political and economic risk.

This is why the correct question is not simply “ADR or Hong Kong share?”

It is:

Which additional dependencies does each structure create, and are those dependencies useful to me?

Mainland shares introduce a third architecture

Foreign investors can also access thousands of mainland A-shares through Stock Connect.

The programme has become a major part of the international investment infrastructure around China. HKEX reported that international investors held approximately RMB2.6 trillion of A-shares through Stock Connect at the end of 2025, representing around 71% of their aggregate A-share holdings. Northbound average daily turnover then reached a record RMB345.3 billion in the first half of 2026. HKEX

The ownership chain is different again.

HKSCC acts as nominee holder while overseas investors are recognised as beneficial owners within the Stock Connect framework. HKEX

A simplified chain is therefore:

foreign investor
↓
broker / custodian
↓
Hong Kong Stock Connect infrastructure
↓
HKSCC
↓
mainland clearing infrastructure
↓
A-share

This gives foreign investors remarkable access to China’s domestic equity market.

It also means that market access depends upon both Hong Kong and mainland infrastructure.

Connectivity is valuable.

It is not the same as independence.

Three China stress scenarios

The scenarios below are intentionally not assigned probabilities.

They should not be read as predictions about China, Taiwan, the United States, Europe or Switzerland.

They are simply progressively more severe tests of financial architecture.

Scenario 1 — Targeted restrictions remain targeted

The mildest scenario resembles much of the architecture already visible today.

Relations deteriorate, but governments continue restricting selected:

defence-related firms;
advanced semiconductor businesses;
sensitive AI activities;
quantum technologies;
particular individuals or companies.

There is no general ban on Chinese securities.

What happens to the investor?

For the majority of Chinese securities, perhaps nothing.

For a company brought inside a specific restriction, outcomes could vary significantly.

A measure might:

prohibit new purchases;
permit existing holdings;
provide a divestment period;
restrict US persons but not non-US persons;
affect only specified subsidiaries;
make certain ETFs unsuitable for US investors;
cause index providers to remove the company;
prompt brokers to apply restrictions more broadly than the minimum legal requirement.

That last point is easy to underestimate.

A broker has its own compliance risk.

An intermediary can decide that a small and increasingly complicated market is no longer worth supporting even if every possible transaction is not itself prohibited.

Legal permission and broker availability are therefore separate questions.

Why a Swiss investor can still be affected

Suppose a Swiss resident is not personally subject to a particular US investment prohibition.

If the account is nevertheless carried by a US broker-dealer, that institution must comply with the rules that bind it. OFAC states that US-incorporated entities and their foreign branches are US persons for sanctions purposes, subject to the exact provisions of the relevant programme. OFAC

The Swiss client’s nationality does not authorise the US intermediary to perform a transaction that the intermediary itself is prohibited from performing.

This does not imply that every targeted China restriction would automatically affect a Swiss account.

It means that broker jurisdiction becomes part of the analysis.

Scenario 2 — Broad restrictions on Chinese securities or financial institutions

The second scenario is more severe.

Imagine that a future crisis produces broad restrictions affecting important Chinese banks, state-owned enterprises or categories of publicly traded securities.

Again, this is a stress test rather than a claim about what any government would choose to do.

The consequences now start to depend heavily on how the asset is held.

Chinese ADR held through a US broker

This is the structure with the clearest direct US nexus.

If a hypothetical measure prohibited dealings in the security, the US broker could have to restrict transactions according to the exact terms of the rule.

If blocking rather than merely trading restrictions applied, OFAC’s general model is more severe: property within US jurisdiction or the possession or control of a US person can be frozen while title remains with the owner. OFAC

That is conceptually close to the investability problem encountered in Russia.

Hong Kong ordinary share held through a Swiss bank

Now remove the US ADS.

The investor holds the Hong Kong ordinary share through a Swiss institution.

That is meaningfully different.

The account relationship is subject to Swiss law and the security no longer requires the US depositary structure.

But the Hong Kong security still depends on:

the Hong Kong market;
Hong Kong clearing infrastructure;
any sub-custodian used by the Swiss bank;
and ultimately the issuer’s ability to operate and distribute capital.

Booking an asset in Switzerland does not make the underlying asset Swiss.

It changes part of the chain.

Hong Kong or Chinese security held through Singapore

Singapore offers another possible intermediary jurisdiction.

DBS, for example, describes direct custody operations in Singapore, Hong Kong and mainland China, together with access to a broader global agent network. DBS Singapore

This can diversify the institution through which Asian assets are held.

But Singapore’s own market rules illustrate the limit of the idea. SGX’s Central Depository may use foreign depositories, custodians and sub-custodians for foreign securities, and its rules expressly contemplate compliance with applicable legal and governmental requirements. SGX Rulebooks

A Singapore statement therefore does not make a Hong Kong share independent of Hong Kong.

It changes the intermediary layer.

Nothing more—and nothing less.

Scenario 3 — Severe financial fragmentation

The third scenario is much more extreme.

Imagine a major cross-strait crisis accompanied by some combination of:

broad Western financial restrictions;
Chinese countermeasures;
restrictions affecting major banks;
temporary market closures;
disruption to Stock Connect;
capital controls;
restrictions on cross-border payments;
suspension of ADR conversion mechanisms;
or limitations at clearing and settlement level.

This is the scenario in which the Sberbank comparison becomes most useful.

Not because China and Russia are equivalent economies.

They are not.

The comparison is useful because multiple independent parts of the ownership chain could fail simultaneously.

ADRs under severe fragmentation

The normal ability to convert an ADS into Hong Kong shares could become highly valuable.

But the moment investors most urgently want to exercise that option may also be the moment when settlement systems, depositaries, regulators or brokers find it most difficult to process.

Alibaba’s two-business-day conversion guidance is explicitly framed around normal circumstances. Alibaba Group

Fungibility is therefore an important structural feature.

It is not a guarantee against geopolitical disruption.

Hong Kong shares under severe fragmentation

The Hong Kong ordinary share removes the American depositary layer, which could prove valuable if restrictions were narrowly focused on US-listed securities.

But it remains exposed to Hong Kong market infrastructure and China-related political measures.

A Hong Kong listing is therefore a different route into the same economic system, not an escape route from China risk.

Mainland A-shares under severe fragmentation

Stock Connect offers an increasingly deep and successful gateway into the mainland market, but its value derives precisely from the connection between Hong Kong and mainland China.

If that connection itself became impaired, the foreign investor would remain dependent on the rules governing the programme and the underlying mainland market.

China ETFs

An ETF diversifies beautifully across companies.

It may diversify less effectively across legal infrastructure.

A US-domiciled China ETF has one set of legal dependencies.

An Irish- or Luxembourg-domiciled UCITS China ETF has another.

Yet both ultimately need access to the securities they own.

The wrapper can change the legal route. It cannot force the underlying market to remain open.

Comparing the three scenarios

Structure	Targeted restrictions	Broad restrictions	Severe fragmentation
US-listed Chinese ADR	Usually unaffected unless issuer covered	Direct sensitivity to US measures	US listing, depositary and conversion channels can matter
Hong Kong share via US broker	Security outside US exchange, but broker nexus remains	Broker’s legal obligations become important	Both broker and HK/China infrastructure matter
Hong Kong share via Swiss bank	Different contractual jurisdiction	Swiss rules and foreign custody chain matter	HK/China infrastructure still common
Asian security via Singapore	Additional intermediary jurisdiction	Singapore rules and local custody chain matter	Underlying Asian market risk remains
Mainland share via Stock Connect	Usually market-access risk rather than sanctions risk	Programme rules become important	Cross-border settlement could become critical
UCITS China ETF	Company diversification	European fund regime relevant	Underlying China/HK access still required

The table should not be interpreted as a ranking.

It maps different dependencies.

Why China is not Russia

There is a powerful economic argument against simply extrapolating from 2022.

China exported approximately US$3.77 trillion of merchandise in 2025, according to the WTO. Its share of total world merchandise exports averaged around 14.4% over the preceding three years. World Trade Organization

Its financial system is also becoming increasingly connected internationally.

The BIS reports that the renminbi represented approximately 8.8% of global foreign-exchange turnover in April 2025 and had become the fifth-most-traded currency globally. Bank for International Settlements

International investors now access trillions of renminbi of Chinese securities through infrastructure such as Stock Connect, while mainland investors increasingly use the southbound channel to buy Hong Kong assets. HKEX

For Switzerland specifically, China is also economically significant. In August 2026, Switzerland and China concluded negotiations to optimise their bilateral free-trade agreement; SECO describes China as Switzerland’s third-largest trading partner after the EU and the United States. SECO

The economic cost of sweeping financial separation would therefore be much broader than in the Russian case.

That matters.

But it does not tell us what policymakers would choose under an extreme geopolitical scenario, and it certainly does not guarantee uninterrupted access to every security.

China’s size is a counterweight, not an insurance policy

The renminbi’s growing international role is sometimes presented as evidence that China can operate outside the dollar system.

The reality is more complicated.

The same BIS analysis that shows rapid growth in RMB trading also reports that roughly 96% of renminbi FX transactions in April 2025 involved the US dollar. Bank for International Settlements

China therefore combines a huge domestic financial system and growing international currency with continued substantial integration into dollar-centred global finance.

This creates reciprocal costs.

It does not create independence.

And reciprocal costs can work in two directions.

China has built its own countermeasure framework

A realistic China stress test cannot examine only what Washington or Brussels might do.

China has also created legal mechanisms for responding to foreign sanctions and extraterritorial restrictions.

Its Unreliable Entity List can impose measures including restrictions on China-related trade and investment against designated foreign entities. Ministry of Commerce

More recently, regulations published in April 2026 established additional mechanisms for countering what China defines as unlawful foreign extraterritorial jurisdiction measures, including a malicious-entity list and restrictions on organisations or individuals assisting in such measures. The State Council of China

These are not merely theoretical statutes. Chinese authorities have continued to announce countermeasures against specified US entities in 2025 and 2026. Ministry of Commerce

The implication for investors is not that China will inevitably retaliate against future Western financial measures in any specific way.

It is that a severe scenario could involve restrictions from both directions.

That was one of the least appreciated features of Russia.

Western sanctions mattered.

Russian countermeasures mattered too.

Can an investor be financially neutral between the United States and China?

Not in the literal legal sense.

A Swiss resident cannot declare neutrality and instruct every jurisdiction involved in his securities transactions to disregard its own laws.

The investor remains subject to:

his country of residence;
his broker’s legal framework;
his custodian’s legal framework;
the market where the instrument settles;
and the issuer’s home jurisdiction.

A more useful concept is operational neutrality.

That means avoiding unnecessary reliance on one financial route when equivalent exposure can reasonably be obtained through several routes.

It does not mean attempting to circumvent applicable sanctions.

Is the Hong Kong ordinary share structurally different from the ADR?

Yes.

Does that automatically make it better?

No.

Feature	US ADR / ADS	Hong Kong ordinary share
Economic issuer exposure	Same underlying company in many dual-listed cases	Same underlying company
US exchange layer	Yes	No
Depositary layer	Yes	No US depositary
Hong Kong infrastructure	Indirect via underlying shares	Direct
Conversion route	Often available	Often available in reverse
Direct US market-regulation exposure	Greater	Lower
Direct HK/China infrastructure exposure	Indirect but still present	Greater
Protection against all sanctions	No	No

The choice is therefore not between a risky and a safe security.

It is between different infrastructure.

Guidefinances view: do not confuse China analysis with China custody analysis

The investment thesis and the ownership architecture should be analysed separately.

An investor may decide Chinese companies are attractive because of valuation, technology, consumer growth, diversification or some other fundamental reason.

That is the investment question.

Only after answering it should he ask:

Should the exposure be obtained through a US ADR?

A Hong Kong ordinary share?

An A-share?

A US ETF?

A European UCITS fund?

Those choices do not determine whether China is a good investment.

They determine how the investor is connected to that investment.

The distinction is easy to ignore in normal markets.

Sberbank shows why it occasionally becomes decisive.

Continue the series

Part I — Sberbank and the Risk Investors Forgot: When a Cheap Share Becomes an Uninvestable Asset

Start with the historical case: how a profitable company could remain economically alive while the international investor’s ability to use the investment collapsed.

Part III — Beyond Asset Allocation: Should Investors Diversify Brokers, Custody and Jurisdictions?

Continue with the practical question: what a US, Swiss or Singapore booking location changes, what remains exposed upstream, and how much infrastructure diversification is actually useful.

Useful Guidefinances tools and guides

The Swiss Financial Stack 2026 explains the broader logic of avoiding unnecessary dependence on a single financial provider. The Swiss Financial Stack 2026

Regulatory and market information reviewed 26 September 2026. The three scenarios are analytical stress tests, not predictions about China, Taiwan, the United States, Switzerland or future sanctions policy.