The rapid growth of Chinese exchange-traded funds (ETFs) in recent years has been described as “staggering” by Morningstar analysts. In just three years, annual inflows to China ETFs increased nearly fivefold, with total yearly inflows reaching 604.3 billion yuan in 2023. This growth has propelled the total assets under management (AUM) of ETFs in China to 1.82 trillion yuan by the end of last year, more than doubling the figure from 2020.
Equity products have been the main driver of this growth, accounting for 96% of the total 870 ETFs in China. Inflows and annual AUM of China’s equity ETFs reached record highs, with the semiconductor sector experiencing significant investment. However, fixed income ETFs and commodities ETFs have developed more slowly in terms of product launches and AUM growth. The ETF market in China is dominated by leading providers like China Asset Management, E Fund Management, and Huatai-PineBridge.
The influx of investments from institutional investors into broad-based index-tracking ETFs has made it challenging for actively managed funds to outperform, contributing to the explosive growth of China’s ETF market. This trend has led to the doubling of total AUM to 2 trillion yuan in less than three years, with the broader China A-shares market showing tepid growth since 2022. Despite challenges in certain niche industries, the Chinese ETF market continues to see strong inflows and record-high AUM, indicating sustained investor interest in the region.
