||In China, domestic firms can issue A and B shares. Domestic investors can only invest A shares while foreign investors can only hold B shares. Unlike other emerging markets, domestic A shares are sold at premium relative to domestic A shares. We conjecture that the premium of domestic A shares is due to the limited alternative investment available to retail investors. Consistent with our hypothesis, empirical evidence indicates that cross-sectional variation of the premia of A shares is negatively related to the relative supply of A shares, and positively related to the relative of B shares. We also find that shares in circulation (effective supply of shares) is a better proxy than the total shares outstanding (total supply of stocks) in explaining the premia. Finally, there is little evidence that the premia is explained by the beta risk and liquidity risk.