The Chinese exchange-traded fund (ETF) market has experienced a remarkable surge in the past few years, with inflows consistently hitting new highs and assets under management (AUM) doubling in a short period of time. According to Morningstar, annual inflows to China ETFs skyrocketed almost fivefold over the last three years, reaching an impressive total of 604.3 billion yuan in 2023. This growth is attributed to the influx of investments by institutional investors into broad-based index-tracking ETFs, driving the total AUM to 2 trillion yuan in less than three years.
In particular, equity products have gained immense traction in the Chinese ETF market, with a staggering 96% of the total 870 ETFs in China being equity-based by the end of 2023. Annual inflows for China’s equity ETFs hit record highs, totaling 575.6 billion yuan in 2023 alone. This surge was fueled by investments in sectors like technology and communications, while sectors like finance and real estate experienced net outflows. The rapid growth of the semiconductor industry also contributed to the increased assets in the tech and communications category.
On the other hand, fixed income ETFs, which make up only 4% of total ETFs in China, showed slower development in terms of product launches and AUM growth. Commodities ETFs, mainly gold ETFs, accounted for less than 2% of the market share. Despite the overall growth of the Chinese ETF market, these sectors have not seen the same level of explosive growth as equity products.
Morningstar highlighted that the Chinese ETF market is concentrated among leading providers such as China Asset Management, E Fund Management, and Huatai-PineBridge, which are the three largest ETF providers based on AUM. These key players have played a significant role in driving the growth of the Chinese ETF market and attracting investments from institutional investors.
The Chinese exchange-traded fund market has experienced unprecedented growth in recent years, with annual inflows and AUM reaching new highs each year. The shift towards equity products, particularly in emerging sectors like technology, has driven this growth, while fixed income and commodities ETFs have shown slower progress. With leading providers dominating the market, the future of Chinese ETFs looks promising but also poses challenges for actively managed funds to outperform in this rapidly evolving landscape.
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