In Depth: Why China’s Index Fund Boom Has Been a Bust for Investors

Retail investors in China have flocked to index funds. Almost 60% of all shares in equity ETFs were held by retail investors by the end of June, according to analysts at Guosen Securities.

Fierce competition among Chinese money managers has energized the country’s 300-billion-dollar index fund (指数基金) sector over the past three years, with the launch of hundreds of funds targeting specific themes (主题) and sectors (行业) including decarbonization, semiconductors, vaccines, and national security.

Faced with a saturated market for broad-based funds that track major indexes (宽基指数基金) like the benchmark CSI 300, and struggling to stand out in a crowded field, smaller management companies are trying to attract investors by offering highly focused funds.

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