Chinese investors are loading up on bond ETFs—fast. Assets in these fixed-income funds have ballooned from $10 billion at the start of 2023 to more than $50 billion by June, according to Bloomberg data. Driving this surge? Corporate bond ETFs, which have quietly become the hottest trade in China's fixed-income market. Their appeal lies in lower fees, better liquidity, and access to high-quality tech-sector credits—without the concentration risk of holding individual bonds. In a deflationary environment where economic uncertainty still looms large, these ETFs are shaping up to be the preferred safety play for both institutions and retail investors alike.
Policy support has only added fuel to the fire. China has rolled out 18 new credit-focused ETFs this year alone—10 of which track tech bonds following a central bank push to ease funding in that sector. One standout is the ChinaAMC SSE Market-Making Corporate Bond ETF, which raked in $2 billion in June and hit a record ¥17.7 billion in trading volume on July 8—more than any stock or bond in China that day. Private funds are tapping ETFs to access the interbank market, banks are diversifying into corporate and convertible paper, and brokerages love the flexibility. Some ETFs are even now accepted as collateral for short-term funding, thanks to a trial program launched last month.
Still, with yields hovering near historic lows and corporate spreads compressing, some analysts are starting to wave caution flags. If bond ETFs become too crowded, price swings in the underlying credit market could intensify. That said, investors don't seem spooked—yet. “Bond ETFs will continue to be our main vehicle for fixed-income investments and cash management,” said Wang Haochuan, bond investment director at Shenzhen Kaifeng Investment. For now, the playbook seems clear: skip the active bond-picking grind, and let ETFs do the heavy lifting.
