China’s ETF market is witnessing a growing divide, with over 180 small ETFs facing liquidation risks as daily trading volumes drop below 1 million yuan. Meanwhile, top-tier ETFs continue attracting massive inflows, with some exceeding 100 billion yuan in assets under management – highlighting the market’s extreme concentration of capital.
The root cause lies in rampant product homogenization, where fund companies repeatedly launch near-identical index trackers while neglecting true innovation. This has led to destructive price wars and left smaller ETFs vulnerable, even as the overall market surpasses 4 trillion yuan in size.
Breaking this cycle requires developing differentiated products like active-ETF hybrids and specialized thematic funds. Without meaningful innovation, the market risks further consolidation where only the largest players survive, limiting investor choice and market efficiency in the long run.
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