BlackRock planning to launch its first China ETF this year

The world's largest money manager will be the first wholly owned foreign fund manager to tap the onshore Chinese ETF market

BlackRock planning to launch its first China ETF this year

BlackRock aims to launch its first product in China's $220-billion onshore exchange-traded fund (ETF) market later this year and has begun hiring workers in preparation.

The world's largest money manager will be the first wholly owned foreign fund manager to tap the onshore Chinese ETF market, which thrives on the surge of passive investing with 70% of its $10 trillion worldwide portfolio in ETFs and index funds, according to recent reporting by Reuters.

As all products supplied are foreign-domiciled, the American corporation now handles the overseas assets of a handful of China's significant state-backed investors, such as the country's sovereign wealth fund and national pension fund, through offshore units.

Citing two unnamed sources with direct knowledge of the matter, Reuters said the first BlackRock ETF product would be launched in the fourth quarter, adding to the 6.8 billion yuan ($1.07 billion) in assets managed by BlackRock through two mutual funds that invest in Chinese and Hong Kong stocks.

Several index providers have begun discussions with BlackRock, but the fund management has yet to pick which index to track for the first ETF product. One source claimed that one of the options being considered is a carbon neutrality-themed index created by China Securities Index Co.

In the last two years, China has witnessed a slew of new environment-related exchange-traded funds (ETFs) arise, all betting on hot new-energy stocks.

"BlackRock is committed to helping more Chinese investors achieve their financial goals by bringing them a broader suite of investment products and solutions, including ETF and index investments," the company commented to Reuters.

BlackRock's anticipated entry into the fast-growing Chinese ETF market comes as the world's second-largest economy continues to open its financial markets.

The move will also help the fund manager expand its footprint in China, where it was the first global asset manager to be granted permission to launch a completely owned onshore mutual fund business last year.

BlackRock's ETF business in China is expected to attract both institutional and individual investors.

China's embryonic $220 billion ETF market, which will have over 600 products by the end of 2021, has only just begun to contribute meaningfully to a worldwide passive fund boom that has pushed the sector's worth above $10 trillion.

Most equities ETFs in China have a management fee of 0.5% per year, which is greater than the 10 to 20 basis points charged by managers of similar products in the United States and Europe, making it an attractive market for foreigners.

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