China’s exchange-traded funds (ETFs) shrugged off the troubles of the country's broader equity markets and soared to an unprecedented Rmb2 trillion ($283 billion) in 2023, double the size of October 2020.
While active funds have floundered in the market downturn – with the CSI 300 index, which tracks the top 300 stocks on the Shanghai and Shenzhen exchanges, plummeting by 11% last year – ETFs have been jumped on by fund houses and investment banks that see an opportunity whose time has come.
One ETF executive, formerly of iShares in the United States and who has since taken the helm at one of China's premier fund houses, reflects somewhat ruefully on the evolution.
"I returned to China to work on A-share ETFs seven years ago, but it was too early,” he says. “Then, we were unrecognized trailblazers. Now, those seizing the moment are celebrated pioneers. It's all about timing."
Landmarks
The uptick in Chinese ETFs echoes regional disenchantment with the underperformance of active funds and the allure of lower-cost passive strategies.
In 2023, Asia outperformed Europe with an 18% growth in ETF assets under management (AuM), with passive ETFs in the region reaching $1.1
