H-shares are stocks of Chinese companies listed on the Hong Kong Stock Exchange. These stocks are denominated in Hong Kong dollars and are offered to foreign investors in the same currency.

H-shares were created to provide foreign investors with access to Chinese companies. This is part of the Chinese government's strategy to gradually open its stock markets to foreign investors, allowing foreign investors to purchase shares of some of China’s largest and most prominent companies.

Prior to the creation of H-shares, foreign investors were limited in their investment options in China. They had to purchase B-shares, which are denominated in U.S. dollars, or do business through an offshore entity like a VIE (Variable Interest Entity).

The benefit of H-shares for foreign investors is that they don't have to pay Chinese taxes. This makes it easier for foreign investors to access Chinese markets. In addition, the Hong Kong Stock Exchange is one of the largest in the world and it is known for its transparency and regulatory infrastructure.

H-shares also benefit Chinese companies, as they can raise capital from foreign investors in their own currency. This helps businesses expand their operations beyond China and access an international investor base. Plus, the Chinese government also permits companies to use H-shares to repatriate money earned abroad.

Despite the opportunities offered by H-shares, there are some risks associated with investing in them. For starters, they are subject to exchange rate fluctuation and investors in H-shares have no control over the companies’ management. In addition, China’s policies on foreign investment and investment restrictions could also impact investors’ returns.

Given these risks, investors must weigh their options carefully before investing in H-shares. Nonetheless, there is potential to obtain higher returns on investment, thanks to China’s enormous market potential. As such, H-shares offer a unique opportunity for foreign investors to benefit from China’s booming economy.