Widening Gap Between Top Performers and Struggling Funds Highlights Industry Challenges
China’s rapidly growing ETF market is showing signs of strain, with more than 180 exchange-traded funds now trading with daily volumes below 1 million yuan ($138,000), according to Shanghai Securities News analysis. The extreme divergence between top-performing funds and those facing existential threats reveals deep structural issues in the world’s second-largest ETF market.
The Liquidity Drought
Critical Warning Signs
- 147 ETFs have assets below 50 million yuan ($6.9M)
- 39 funds hold less than 20 million yuan ($2.8M)
- Some ETFs record daily trades under 10,000 yuan ($1,380)
Recent Delisting Alerts
- Invesco Great Wall’s MSCI China A ETF (50 days below threshold)
- ICBC Credit Suisse’s CSI 2000 ETF
- Yinhua CSI 1000 Enhanced Strategy ETF
“Liquidity is the lifeblood of ETFs,” warned a Huaxia Fund spokesperson. “When daily volumes collapse, bid-ask spreads widen dramatically—creating hidden costs that compound with each trade.”
The Matthew Effect in Action
CSI 300 ETF Landscape
| Fund Manager | AUM (Billions) | Market Share |
| Huatai-PineBridge | ¥380.2 | 42.7% |
| E Fund | ¥263.0 | 29.5% |
| ChinaAMC | ¥160.0+ | 18.0% |
| Harvest | ¥160.0+ | 18.0% |
| TianHong | ¥9.4 | 1.1% |
New Product Struggles
- CICC CSI 300 ETF: 51% asset decline since January launch
- Wanja CSI 300 ETF: 56% drop from IPO size
“ETF markets follow a brutal winner-takes-all logic,” said a Shanghai-based fund analyst. “Once liquidity thresholds are breached, the death spiral accelerates.”
The Innovation Imperative
Global Lessons
- First-mover advantage lasts 12-18 months before fee compression begins
- Niche strategies maintain 30-50bps premium over plain-vanilla ETFs
- 23% of US ETF launches target untapped risk factors
Local Adaptation Strategies
Insurance-Tailored Products
- Low-volatility income strategies
- Derivatives-linked structured ETFs
Next-Gen ETF Formats
- Buffer ETFs with downside protection
- Semi-transparent active ETFs
Smart Beta 2.0
- Multi-factor combinations
- Thematic space (quantum computing, aging society)
“Monetizing liquidity provision and developing proprietary indices are becoming existential questions for mid-sized players,” noted Wind Fund’s Jane Meng. With operating costs exceeding management fees for 50% of ETFs, the industry faces urgent consolidation pressures.
As Bosera Fund’s Zhao Yunyang observed: “The next phase of China’s ETF evolution won’t be about asset gathering—it will be about solving real investor problems through financial engineering.” The coming year may determine whether the market can transition from speculative product cloning to sustainable innovation.
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