China is expanding access to its US$8.4 trillion stock market with the introduction of 85 new exchange-traded funds (ETFs) tracking mainland equities through the cross-border trading channel for offshore funds. ETFs have gained popularity in Asia due to their transparent and diversified nature, with China seeing significant growth in this market.
Annual inflows to China ETFs have multiplied in the past three years, reaching a total of 1.82 trillion yuan (US$261 billion) by the end of 2023. The Stock Connect scheme, initiated 10 years ago, has opened up China’s onshore market to global investors.
The expansion of cross-border investment channels has allowed for the inclusion of various ETFs under the Stock Connect mechanism. Investors can trade eligible mainland ETFs through the northbound leg, adhering to specific regulatory requirements.
With the market set to grow further, international investors have the opportunity to participate in China’s onshore market through a range of ETF products, providing access to different sectors and indices.