China readies physical ETF market for offshore investment

The decision to allow offshore investors to access physical China ETFs is set to catalyse the market – but obstacles remain

Three years ago synthetic exchange-traded funds (ETFs) were in the dock, accused by a body as august as the Financial Stability Board of constituting "a powerful source of contagion and systemic risk". Despite widespread fears that synthetic ETFs – particularly those based on Asian underlyings – were the most likely source of the next financial crisis, subsequent regulatory action was slight.

But while regulators restricted themselves to requiring greater levels of collateral in synthetic ETFs