China?s recent removal of short selling and margin trading bans on selected stocks enables testing of the relative effect of margin trading and short selling. We find the prices of the shortable stocks decrease, on average, relative to peer A-shares and cross-listed H-shares, suggesting that short selling dominates margin trading effects. However, there is negligible short sales activity and contrary to the regulators? intention, and recent empirical evidence, liquidity declines and bid-ask spreads increase in these shortable stocks. Consistent with Ausubel (1990), together these results imply uninformed-investors avoid these stocks to reduce the risk of trading with informed-investors.