China has given the greenlight for actively managed exchange-traded funds, a move that is expected to expand investors’ exposure from just passive beta investments into alpha-seeking strategies.
Wu Qing, chairman of the China Securities Regulatory Commission, announced the approval for active ETFs at the annual Lujiazui Forum on June 17. He said it was part of the regulator’s drive to expand investment products and tools.
On the same day, the Shanghai and Shenzhen stock exchanges released guidelines for the funds, covering eligibility requirements for fund management companies and portfolio managers, product investment operations, information disclosure, and risk prevention.
Thus far, no asset managers in China have publicly announced plans to launch active ETFs.
These funds will deliver a “distinct hybrid value proposition” for investors in China, according to Yiming Li, a senior analyst at Morningstar.
“They retain the core strengths of traditional passive ETFs, including intraday tradability, real-time portfolio transparency, efficient arbitrage mechanisms, and generally lower expense ratios than conventional active mutual funds, while providing access to professionally managed active strategies that can potentially generate excess returns,” he explains.
Chinese ETF providers have hitherto been restricted to enhanced index ETFs, which allow a maximum deviation of 20% from their benchmark indices. Active ETFs will remove that limit.
The rollout of active ETFs will be timely, offering investors “a transparent, liquid wrapper that feeds the rising appetite for returns”, Bloomberg Intelligence analysts Rebecca Sin and Jack Wang wrote in a research note on June 16, a day before the Chinese regulatory approval was announced.
“With traditional mutual funds under criticism in China, active ETFs offer a lower-cost, more transparent alternative better aligned with Beijing’s push to make investments accessible and fair,” they said.
Surging inflows
Active ETFs have been gaining traction across Asia Pacific since the first fund was launched in Australia in 2015, with rollouts in markets like Hong Kong, Taiwan and Singapore. Taiwan launched its first active ETFin May last year, andthere are now 25 of the funds listed on the local bourse.
Morningstar figures show that net inflows into major active ETF markets in Asia Pacific surged 133% to US$7.25 billion in the first quarter of this year from $3.11 billion in the same period of 2025. Assets jumped 75.89% to $74.56 billion over the 12 months to March 2026.
Li says China has been slower to launch active ETFs because regulators there tend to take a prudent and gradual approach to new financial products so as to contain risks.
In their research note, Sin and Wang said that ETF assets under management in China fell to $700 billion by May 2026 from $860 billion in the fourth quarter of 2025 as Chinese state-backed investors unwound their holdings.
They predict that active ETFs could inject at least $50 billion of assets into the Chinese stock market within the first year of launch, assuming they capture 7% market share, similar to the level in Taiwan. This, they say, would give a “much-needed boost for a rapidly contracting market”.
But Li is more cautious, saying that the scale of inflows into active ETFs will depend on investor acceptance of the new product.
