Chinese regulators have launched a targeted review of foreign institutional trading in mainland China-listed ETFs, prompted by a regulatory probe into Jane Street’s India-focused investment activities. The move marks a broader tightening of cross-border capital flow oversight.
- CSRC launched a formal review of foreign ETF trading activity in China following Jane Street’s India-related trade probe
- Foreign ETF participation in China reached ¥1.8 trillion ($250 billion) by end-2025, up 38% YoY
- 12% of foreign ETF assets under management involved indirect India exposure
- Regulators are demanding transaction logs, counterparty details, and risk assessments from foreign investors
- QFII and RQFII program participants face stricter compliance scrutiny
- Several foreign asset managers have paused India-linked ETF product launches
Chinese financial authorities have initiated a formal review of foreign investor activity in exchange-traded funds (ETFs) listed on Shanghai and Shenzhen stock exchanges. The scrutiny follows an investigation into Jane Street Capital’s trading patterns involving India-focused ETFs, which triggered concerns over potential regulatory arbitrage and capital flight risks. The probe, reportedly led by the China Securities Regulatory Commission (CSRC), focuses on transactions executed through offshore vehicles and their impact on domestic market stability. The review targets foreign institutional investors with significant exposure to China-registered ETFs, particularly those with exposure to emerging market equities. Data from the Shanghai Stock Exchange indicates that foreign participation in ETFs surged by 38% year-on-year in 2025, reaching a record ¥1.8 trillion ($250 billion) in assets under management. Of this, approximately 12% was linked to funds with indirect India exposure, raising red flags about compliance with capital account controls. Regulators are particularly examining transactions involving offshore subsidiaries and special purpose vehicles used to access China’s onshore ETF market. The investigation has prompted several foreign asset managers to pause new India-linked ETF launches and reassess their trading models. Market participants note that the CSRC has requested detailed transaction logs, counterparty information, and risk assessments for all foreign ETF trades executed between January and November 2025. The move comes amid growing pressure to ensure financial system resilience as capital inflows remain volatile. Institutions with direct access to China’s Qualified Foreign Institutional Investor (QFII) and RMB Qualified Foreign Institutional Investor (RQFII) programs are now subject to enhanced due diligence. The regulatory tightening could affect global asset managers with exposure to China’s ETF market, including firms based in the U.S. and Europe.