China displaced Europe as the world's second-largest market for money market funds during the latest quarter, according to a Fitch Ratings report.
A 12% gain in money market fund assets to 10.6 trillion yuan ($1.6 trillion) over the first half of 2022 lifted China's share of global money market assets to 18% of an estimated $8.8 trillion total as of June 30, leaving Europe in third place with 17%, the report said.
The U.S. remained the world's biggest money market fund market with 55% of the total.
Money supply in China, meanwhile, as measured by broad money, or M2, rose by 8% in the first half of 2022, more than Europe, which saw a 2.6% gain, and the U.S., which was effectively flat. The report noted the strong historical correlation between M2 and money market fund asset growth in China.
Separately, the report noted, a Chinese money market fund sector that five years earlier had been dominated by a single fund, Ant group's Yu'e Bao, which peaked in 2018 at 1.7 trillion yuan, has continued to become more balanced and diversified.
Under regulatory pressure aimed at preventing systemic risks, Yu'e Bao — while still China's biggest money market fund with roughly 775 billion yuan in assets — now accounts for only 7.3% of the country's money market fund assets, down from more than 30% of total assets in 2014.
And China's top five money market funds' combined share of total assets, at 15%, is now less than the corresponding figures for the U.S. and Europe at 24% and 20% respectively.
In response to regulatory concerns, meanwhile, Yu'e Bao in recent years has morphed from a single fund to a multi-money market fund platform of 29 funds with combined assets of 2.8 trillion yuan. A separate money market fund distribution platform, Li Cai Tong, affiliated with Tencent Holdings' WeChat social media app, likewise has 29 funds and combined assets of 2 trillion yuan.
The average Chinese money market fund fee stood at 25 basis points at the end of 2022, sharply higher than the 14 basis points paid by U.S. investors and the 11 basis points paid by European investors.
