In the winter of 1999,as people around the world bid farewell to the millennium and anticipated the dawn of a new era,a significant transformation was taking shape in a different corner of the globe.Liu Xiaodong,a man from Henan province,was standing by the East River in Manhattan,waving goodbye to his long-standing career in investment banking.His decision marked a departure not only from his job but also from the dreams many held about Wall Street.Liu had grand ambitions; he intended to develop a Chinese version of Exchange-Traded Funds (ETFs).

Fast forward to 2004,Liu had ascended to the role of Vice General Manager at the Shanghai Stock Exchange,where he enthusiastically declared,“Not only do we want to create the SSE 50 ETF,but we will also launch more innovative ETF products.” That winter saw the birth of China's first-ever ETF—the SSE 50 ETF—just as the Chinese stock market was preparing to embark on a lengthy bull run.This moment resembled planting a seed,a small yet potent sign of growth to come within China's capital markets.

By 2024,as China’s economy surged to become the world's second largest,the effects of Liu's initial efforts had far surpassed expectations.Industries ranging from artificial intelligence to aerospace showed tremendous growth,and the capital markets drew global attention.The small seed of an ETF that had been planted two decades earlier had flourished into a massive financial tree,boasting a size exceeding one trillion yuan.

The rapid growth of the ETF market can't be understated.Back in 1999,when Liu made his call for a Chinese ETF,the global ETF market was already worth an impressive 16 trillion yuan.Today,China’s ETF market surpasses 30 trillion yuan,with passive funds holding a greater market cap in A-shares than active funds.It is clear that we have entered an era defined by passive investments.

The passage of twenty years might seem like just a blink of an eye,but it was loaded with trials,innovations,and growth.The journey of ETFs in China has not been without its challenges; it has been more about breaking barriers than celebrating triumphs,achieving success after years of quiet preparation.

The roots of the Chinese mutual fund industry can be traced back to 1998 with the establishment of several fund companies,including the much-respected China Asset Management.During this time,both of China’s major stock exchanges began exploring new fund products.While the Shenzhen Stock Exchange pursued the development of Listed Open-Ended Funds (LOFs),the Shanghai Stock Exchange set its sights on ETFs.

In 2001,the Shanghai Stock Exchange first floated the idea of ETFs while investigating product innovations.However,given the limited number of available indices and the novelty of the concept,there was hesitation among potential investors and fund managers to go forward.

For three long years,the market awaited someone to take the plunge—the "first mover" who would dare to become the pioneering force in this unexplored territory.

The winter of 2004 turned out to be particularly harsh,but for a dedicated group within the capital markets,every moment was charged with excitement and anticipation.Armed with legal approvals,China Asset Management saw an unprecedented opportunity and began collaborating with the Shanghai Stock Exchange to issue ETF products.They swiftly became the frontrunner among the numerous fund companies vying for ETF development authorization,ultimately launching China’s first ETF—the Huaxia SSE 50 ETF.

The launch sent shockwaves of enthusiasm rippling through the capital market.Major brokerage houses in Shanghai were plastered with promotional posters for the ETF.The campaign attracted considerable attention,enticing investors with the slogan,“Give your investment a chance for a change.”

However,the initial response to this new product was lukewarm due to the complexity of the trading rules associated with ETFs.Many client managers from financial institutions found themselves explaining the intricacies of these rules to investors,often needing to explain them multiple times for true understanding.

Li Yimei,General Manager of China Asset Management,reflected on the challenges faced during the ETF's introductory phase in 2004.She recalled the relentless roadshows and presentations across the country as their sales team worked tirelessly to educate potential investors about this innovative,yet unfamiliar investment tool.

Nevertheless,through perseverance and commitment,a breakthrough was achieved.The Huaxia SSE 50 ETF successfully raised approximately 6.5 billion yuan in assets,setting a sturdy foundation for the future growth of ETFs in China.

The early successes of the Huaxia ETF inspired other fund managers to enter the burgeoning market.By 2006,notable funds like E Fund,Huatai-Pb and Hwabao Securities had secured approvals to issue their own ETFs.The entry of these players signaled that Huaxia was no longer alone in its venture; the curtain was slowly lifting on a blossoming ETF market.

Post-2010 saw an even more significant acceleration in ETF innovations as the vast array of market indices began to diversify.These indices bridged companies,financial products,and investors—demonstrating their crucial role in the high-quality development of the capital market.ETFs have not only funneled investments into the capital market to aid economic growth but have also supplied residents with essential tools for wealth management and asset allocation.

Recent years have displayed remarkable trends,particularly evident in the capital market’s support for state-owned enterprises and high-tech industries.The recently established Central State-Owned Enterprise ETF products have cumulatively crossed 40 billion yuan,while high-tech sector indices like the Science and Technology Innovation Index surpassed 150 billion yuan.

As of now,the ETF market within China has already surpassed a staggering 30 trillion yuan,with investments reaching nearly 10 million households.This level of penetration demonstrates the increasingly prominent role that ETFs are playing in accessible financial services.

By October 8,2024,the scale of equity-based ETFs broke the landmark of 30 trillion yuan,making it a historic achievement.The journey of breaking through various threshold values was telling; while it took 16 years for the ETF scale to first hit the one trillion mark,subsequent milestones of 20 trillion and 30 trillion were achieved in mere three years and ten months respectively.

Yet,in this thriving ETF space,the journey is not as breezy as it appears.Just because the market is abundant with investments doesn’t guarantee easy profits.Investors are keenly interested in opportunities related to core A-share assets,yet navigating the increasingly crowded landscape of index names can be confusing.How does one choose a specific index to invest in when there are so many similar-sounding options?

Could there be a tool designed to simplify index investing,one that is user-friendly,thorough in providing information,and tailored specifically for this purpose?

Li Yimei often expresses the importance of making the complex simple for investors.Her philosophy captures the very essence of the endeavor—helping customers navigate the financial landscape effortlessly.She cites their early motivations in establishing their ETF products as fundamentally tied to this ethos.

This collective growth from the inception of the ETF signifies a shared benefit among all fund companies and their investors.The launch of the “Red Rocket” index tool,accessible to all investors and institutions,represents a leap toward enhanced clarity in investment.

The "Red Rocket" platform enables a comprehensive service relating to index investments for both inexperienced and seasoned investors alike.By addressing macroeconomic perspectives and micro-level intricacies,the platform serves as a crucial guide in demystifying index investing.It aims to assist investors in making well-informed choices,thereby alleviating the stress of “choice paralysis” when it comes to selecting tracking funds for specific indices.

As an instrument built for the masses,the Red Rocket tool aims to empower financial advisors and professionals to better serve the growing number of index investors in the market.

Reflecting on this journey,one realizes that understanding companies requires a deeper insight into their core structures.Just as twenty years ago,when China Asset Management showed audacity to explore uncharted territories in index investments,they are now pioneering once again by launching the index investment service platform—Red Rocket—at a time when index investing is gaining widespread popularity.

The realm of China’s wealth management is advancing at breakneck speed; the demand for new products is reaching a critical point.Policies encouraging a rapid review process for ETFs continue to emerge alongside investor education initiatives,paving the way for wider adoption.More investors are waking up to the scientific investment principles that underline index diversification and planning,which will undoubtedly accelerate the development of China's ETF market.

As we gaze into the future horizons,the next two decades for ETFs appear promising.In light of the rapid growth of ETFs and the sense of responsibility shown by Liu and others at China Asset Management,one might say the future resembles the blooming pomegranate blossoms in May—radiantly vibrant and full of potential!