Shanghai/Hong Kong (Reuters) – Major Chinese fund companies announced significant reductions in fees for several equity exchange-traded funds (ETFs) on Wednesday, escalating competition in the fast-growing $400 billion sector.
This move follows comments by Wu Qing, China’s chief securities regulator, who called for greater support for index investing and reforms in fund management fees.
ETFs, which are investment funds traded on exchanges and designed to track indices, have surged in popularity this year as investors move away from underperforming active fund managers. The latest fee reductions aim to draw more capital into a waning bull market.
China Asset Management Co (ChinaAMC), the country’s leading ETF manager, announced cuts in management and custodian fees for eight ETF products. Among them is the 160 billion yuan ($22.1 billion) China SSE 50 ETF. Management fees for these products will drop to 0.15% from 0.5%, and custodian fees will be halved to 0.05%.
Other fund managers, including E Fund Management, Huatai-PineBridge Fund Management, Harvest Fund Management, and HuaAn Fund Management, have also introduced similar cuts.
ETF Market Growth
China’s onshore ETFs have attracted over 900 billion yuan in net inflows this year, setting a record for the decade, according to BNP Paribas. The total value of China’s stock ETFs jumped from 1.81 trillion yuan at the end of June to over 3 trillion yuan—a 66% increase in less than five months.
The growth has been fueled partly by state-backed funds investing heavily in the market earlier this year and by fierce competition among fund managers to gain market share, driving fees lower and attracting new investors.
Shift from Active to Passive Investments
Many retail investors are turning to ETFs, which offer lower costs and easier access to the market, amid disappointment with active funds. These funds have struggled to navigate China’s policy-driven bull market, which began unexpectedly in late September.
While the benchmark CSI300 index has surged 16% this year, an index tracking China’s active equity funds has risen just 3%, highlighting the underperformance of active managers.
“Active fund managers are failing to beat the market, and investors no longer trust them,” said Lu Deyong, a retail investor from northeastern China. “ETFs are now the preferred choice for many.”
Last month, passive funds surpassed active funds in holdings of Chinese stocks, a trend noted by Shanghai Securities News.
The fee cuts and ETF market growth underline the shifting dynamics of China’s investment landscape as passive strategies gain ground over traditional active management.
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