China ETF Market Growth Led by National Team Expansion

Shanghai, China, Wednesday, January 10, 2024 – The influence of China’s “national team” of State-affiliated institutions in the country’s ETF market appears to be growing, with fresh evidence of their buying activity extending beyond their traditional core players. Reports said that this trend was raising questions about the motives behind these purchases and their potential impact on the broader market dynamics. ¹

The term “national team” was coined in 2015 to describe large, State-backed institutions that intervened in the Chinese stock market to prop up prices during periods of volatility. In recent years, these same institutions have been observed actively buying ETFs, particularly those focused on blue-chip A-shares.

This trend has intensified in 2024, with reports suggesting that new State-owned entities, including China Reform Holdings and major insurers like China Life and New China Life, are joining the buying spree.

Notably, the recent purchases have been more diversified, targeting specific sectors like technology instead of solely focusing on broad market indices.

Analysts offer varying interpretations of this development. Some argue that it could be a subtle form of market intervention aimed at stabilizing the A-share market, which has faced headwinds from economic slowdown and regulatory uncertainties.

Others believe it might be a strategic move by State institutions to gain greater control over the allocation of capital within the ETF market.

Critics argue that these large-scale purchases could inflate ETF prices artificially and create an uneven playing field for other investors.

Additionally, the lack of transparency surrounding the national team’s activities raises questions about their accountability and potential conflicts of interest.

Despite the uncertainties, the expansion of the national team’s footprint in the ETF market is undoubtedly a significant development with far-reaching implications. It highlights the growing influence of state-backed institutions in China’s financial sector and raises questions about the future trajectory of the country’s capital markets.

1. China’s ETF Market: https://www.ft.com/content/e2570389-fab7-48a7-b759-d002288a0a43[↩]