Low risk+high return! The number of corporate bond ETFs in China soared, increasing sixfold in half a year.

The Chinese bond ETF market is experiencing explosive growth.

On July 21st, according to Bloomberg data, the asset management scale of China's bond ETFs has grown fivefold in just one and a half years, soaring from $10 billion in early 2024 to over $50 billion by the end of June this year. This growth rate is extremely rare in the global fixed-income ETF market.

Corporate bond ETFs have stood out the most in this round of growth, with their number surging sixfold compared to the end of last year. They now account for more than half of the entire bond ETF market and have become the main driving force behind the overall scale expansion.

Behind this growth boom lies a strong demand from investors for low-cost and highly liquid products. Corporate bond ETFs not only offer the advantage of a diversified investment portfolio, but also enable investors to access corporate bonds with higher yields, while avoiding the default risk of directly investing in a single bond.

With policy support, technology bond ETFs have emerged as a powerful force

Policy-level support has further promoted this trend.

This year, the central bank has introduced special policies to support the financing of technology enterprises, which has led to a sharp increase in the issuance of technology bonds, and related ETF products have emerged as a result. As many as 10 technology bond ETFs were listed and traded in July this year alone.

Among the eight technology bond ETFs launched at the beginning of the year, five made it onto the list of the top ten funds with the largest capital inflows in Asia in June. The ChinaAMC SSE Benchmark Market-Making Corporate Bond ETF topped the list with $2 billion in funds attracted, becoming a star product in the market.

Qiu Wenzhu, a fixed income analyst at Huatai Securities, told the media, "Before last year, investors rarely talked about bond ETFs, but then we began to see an increase in demand." Bond ETFs have become a market hotspot this year.

In addition, some bond ETFs have also acquired new functions. Under the pilot program launched in June, some bond ETFs can be used as collateral for short-term borrowing, which further enhances their appeal.

Qiu Wenzhu added that private equity funds use such products to expand their investment in the inter-bank market, banks take this opportunity to diversify their investments in corporate bonds and convertible bonds, while the self-operated accounts of securities firms favor their flexibility and low cost.

However, this investment frenzy has also raised market concerns about potential risks. Some analyses suggest that if bond ETFs themselves become a form of overheated trading, it may intensify the price fluctuations of their underlying assets, leading to extremely large-scale buying or selling.

"The expansion of the ETF market is likely to lead to an increase in the volatility of the entire credit market," wrote Sun Binbin, an analyst at Caitong Securities, and others in a report on July 8.

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