Until recently, trading in Chinese markets was fully segmented―B-shares for foreign investors and A-shares for domestic investors. The fact that B-shares trade at a discount is a puzzle, since comparable markets overwhelmingly show premiums that are easily explained by international asset pricing models. The two most common explanations for this puzzle are that domestic investors are (i) better-informed and (ii) face lower costs of liquidity. The evidence, however, is inconclusive and relies on poor proxies. Based on as of yet unused trade and quote data, we explore direct measures of both information and liquidity using a spread decomposition model. We reject the liquidity-based explanation and find considerable support for betterinformed domestic investors. This creates an empirical basis for recent equilibrium models that rely on asymmetric information to explain China’s strong growth in spite of poor property rights.