China ETF Market Surges, Led by Equity Funds: Morningstar
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The Chinese ETF market has soared in recent years, with total assets under management more than doubling to $1.8 trillion yuan (currently about $250 billion) over a three-year period ending in 2023, according to a new report from Morningstar.
Equity ETFs drove the surge, accounting for 94% of total ETF AUM in China at the end of 2023, according to the report. Annual inflows to China ETFs jumped nearly fivefold from 127.2 billion yuan in 2021 to 604.3 billion yuan in 2023.
“Equity ETFs gained immense traction over the past three years, with inflows and AUM at record highs,” the report stated. “The annual inflows in 2023 far exceeded the total inflows in the four years between 2019 and 2022.”
According to the report, two categories—large blend equity and sector equity technology and communications—topped the chart, accounting for over 40% of all equity ETF assets. Broad-based index trackers like CSI 300 ETFs saw strong institutional inflows, while thematic tech ETFs also attracted significant assets.
Fixed income ETFs developed more slowly, with only 17 products on the market by the end of 2023, the report stated. However, short-term bond ETFs saw growing demand amid equity market volatility.
3 Issuers Dominate China ETF Market
The ETF market remains concentrated among top providers, with the three largest–China Asset Management, E Fund Management and Huatai-PineBridge—controlling 46% market share, the report stated, but competition is intensifying beyond the top tier.
“This illustrates the intense competition among the ETF providers in China,” the report noted.
Looking ahead, the report suggests that China’s ETF market has room for further expansion, especially in fixed income and commodities, as it remains less concentrated than the U.S. market where the top three providers hold a nearly 80% share.
The report also highlighted the rapid growth of QDII sector equity ETFs, which invest in overseas markets.
“Flows into the QDII sector equity category have increased rapidly since 2021, with average annual inflows of about 60 billion [yuan] over the past three years,” the report noted.