The mainland regulator posted an FAQ notice on its website stating that "investors are legally entitled to the rights and benefits of shares acquired through the northbound trading link.
"Accordingly, the CSRC Stock Connect Rules have expressly stipulated that, in northbound trading, overseas investors shall hold SSE [Shanghai Stock Exchange] securities through HKSCC and are entitled to proprietary interests in such securities as shareholders."
The regulator also said the investor has a right to legal action in China's courts. "As long as an overseas investor can provide evidential proof of direct interest as a beneficial owner, the investor may take legal actions in its own name in mainland courts."
Beneficial ownership - the legal certainty and enforceability of the rights of northbound investors holding A-shares bought via the Stock Connect - has been the top issue for foreign investors.
In an earlier interview, David Stevenson, head of product and business development for Baring Asset Management, told Fund Selector Asia the resolution of beneficial ownership was necessary so that the firm could adopt Stock Connect into its entire UCITS product range.
This is the first official clarification on the issue from China. In early January, the Hong Kong Exchange said beneficial ownership is part of both Hong Kong law and Mainland China law.
Investors retain proprietary rights in the A-shares held through the Hong Kong Securities Clearing Company (HKSCC), a wholly-owned subsidiary of HKEx, "even if HKSCC were to become insolvent - the most important hallmark of beneficial ownership," the Hong Kong Exchange said at the time.