Li Yimei, General Manager of ChinaAMC: The development of China's ETF market will show three major trends

China Fund News reporter Li Shuchao

On April 23, the "ETF 20th Anniversary Forum" hosted by China Fund News was held in Shenzhen.

At the end of 2004, ChinaAMC SSE 50 ETF, ChinaAMC SSE 50 ETF, was established. As the manager of China's first ETF, ChinaAMC is also the largest fund manager in the industry in terms of ETF product management. Li Yimei, general manager of China Asset Management, attended the event and delivered a keynote speech. She said that looking at the global capital market, ETFs are a fast-growing track, and the mainland ETF market has also burst into strong vitality. With the improvement of policy support and regulatory environment, and the favorable timing, location, and people for the development of China's ETFs, China's ETF market has also ushered in explosive growth.

She believes that the mainland ETF market has entered a stage of high-quality development from a relatively extensive development stage, and there will be three major trends in the future: one is active management to empower product creation, the second is that competition extends from product creation to product operation, and the third is from a single product to a combination and strategic comprehensive solution.

China's ETF market has exploded with strong vitality

Li Yimei said that looking at the global capital market, ETF is a fast-growing track. In the past 20 years, the average annual compound growth rate of global ETF scale has reached 22.16%, and the number of products has maintained positive growth for 20 consecutive years. By the end of 2023, the global ETF market exceeded $11 trillion for the first time. In China, it took 16 years for the ETF market to reach 1 trillion yuan, but it took only 3 years to reach the second 1 trillion yuan. Since 2021, the two-year compound growth rate of domestic ETF scale has reached 20.41%, far exceeding the 4.02% growth rate of the mutual fund market in the same period. At the end of last year, we witnessed milestones such as the ETF scale exceeding the 2 trillion yuan mark and the birth of the first stock ETF with a scale of more than 100 billion yuan. Today, the number of stock ETFs with a scale of 100 billion yuan has increased to 5, and the first stock ETF with a scale of more than 200 billion yuan has also appeared.

She said that with the great development of the industry, the ETF business of China AMC Fund has also developed from 1 product with a scale of 5.4 billion yuan to 87 products with a scale of more than 470 billion yuan. What's even more gratifying is that the supply of domestic ETF products and the growth of holders are forming an upward spiral. In addition, ETFs have become a "trumpeter" for investment opportunities in the new economy and an "accelerator" for the development of new quality productivity in the volatile stock market.

The time, place, and people for the development of China's ETFs

Li Yimei said that from the perspective of overseas markets, the vigorous development of passive investment represented by ETFs in the United States began in 2008, and the resonance of multiple internal and external factors has made the US ETF market achieve leapfrog development. China's wealth management industry is experiencing a similar turnaround, especially in recent years, with improved policy support and regulatory environment, market volatility stimulating hedging demand, and on the other hand, increasing market maturity, ETF investor education, international investors joining the market, technological advancement to facilitate trading, and product innovation and diversification, all of which have contributed to the explosive growth of China's ETF market.

In addition, the development of ETFs in China has its own time, place, and people.

In 2004, when the first capital market "National Nine Articles" was promulgated, ETFs took root in China, and in 2024, the third capital market "National Nine Articles" was promulgated, emphasizing the establishment of a fast track for ETF approval to promote the development of indexed investment. In the context of the registration system, the virtuous cycle of high-quality listed companies and indices provides fertile ground for the development of ETFs. In addition, various policy support, institutional innovation and the universal application of investment consulting are expected to boost ETFs to become bigger and stronger.

In terms of geographical advantages, the diversified and flexible tool attributes of ETFs give them rich and scalable application scenarios. At present, some mainstream broad-based ETFs have built a derivatives ecosystem including stock index futures, stock index options and ETF options, and the increasing improvement of the ecosystem has further enhanced the attractiveness of ETFs.

In terms of people, the source of ETF development is still the demand of investors. At present, there are 200 million shareholders and 700 million basic citizens in A-shares, but only nearly 10 million people participate in ETF investment, and there is still a lot of room for improvement in the penetration rate of ETF holders. With the further opening up of China's financial market, more international investors will enter the Chinese market through ETFs.

There will be three major trends in the ETF market

Li Yimei believes that ETFs in China have entered a stage of high-quality development from a relatively extensive development stage, and there will be three major trends in the future:

The first is active management to empower product creation.

In overseas markets, whether it is the underlying index, index providers or managers, they all show strong diversification characteristics. For example, in the U.S. ETF market, among the nearly 3,000 ETFs, the number of ETFs tracking the same index is at most 4. On sector themes, managers tend to use indices of companies with different indices or adopt a form of active management, even in similar directions. Although many fund managers cannot compete with the giants on a broad basis, they focus on factor investment, leveraged inverse, structured income strategies, and multi-asset alternative strategies, and all of them have found customers in the market and established their own ETF ecosystem.

Second, competition extends from product creation to product operation.

Since 2019, the ETF market has developed rapidly, and we are steadily moving towards the era of "everything can be ETF". Under the trend of gradual improvement of ETF categories, the strategy of "focusing on initial offerings and ignoring operations" has become unworkable. The growth of ETF scale in 2023 is mostly due to the continuous marketing of existing products, with a holding contribution of up to 85%, so the momentum of all parties in the market to invest resources and carry out sustainable operation of ETFs is becoming more and more fierce.

The third is from a single product to a combined and strategic integrated solution.

In the future, the focus of ETFs is not only the operation of single products, but more importantly, the introduction of better ETF solutions, the creation of one after another multi-"military" collaborative "synthetic battalion", and the creation of ETF investment solutions based on different scenarios, among which, the ecological model of "investment advisory + ETF" is worth paying attention to. ICI statistics show that in the past 10 years, the proportion of investment advisers in the United States allocating ETFs has increased significantly, from less than 10% to about 40%.

In the future, there will be more and more participants in the ETF ecosystem, and there may even be new roles, more resource endowments, and new cooperation models, new opportunities and challenges.