American Market Makers Poised to Infiltrate China’s $520 Billion ETF Market—Manipulation Goes Burr..

Well, I never thought I’d see the day, but here we are: China is flirting with the idea of letting Western market makers like Citadel Securities and Jane Street into its $520 billion ETF market. Which is a BFD, if it actually happens. But, this is China we’re talking about, and in the current geopolitical climate, nothing is straightforward. In fact, think of this as a balancing act between Beijing’s desperate need for functioning capital markets and its equally desperate desire not to look like it’s bending over for the U.S.

(Source: Giphy) 

In short, China’s ETF market is bloated and inefficient right now. And while its 134% growth over the past two years looks impressive, it’s ballooned mostly because the government has been pumping in state capital to prop up the stock market. It’s now the second-largest ETF market in Asia-Pacific after Japan, but the trading infrastructure is still a mess. Domestic market makers are undertrained, overregulated, and can’t provide the kind of liquidity that actual participants need to trade efficiently.

So, on paper, bringing in firms like Citadel, Jane Street, or Optiver, who basically rig run the show in the West, would be the logical step forward. Especially since these institutions know how to price risk, and move billions in ETF volume without breaking a sweat. But, but, but… as I’m sure you know, there is one problem: a tariff pissing match.

(Source: Yahoo Finance) 

This is all happening while the U.S. and China are in the middle of a trade war that’s escalated to the point of economic theater. The U.S. has slapped China with 145% tariffs, and China’s responded in a “Everything you can do I can do better” manner. Meaning, this environment isn’t the ideal time where Beijing can roll out the red carpet for Ken Griffin without looking like it’s capitulating to the enemy. That’s the core tension here. 

However, like I mentioned above, China’s financial system is a mess and needs outside help, badly. But the Communist Party doesn’t want to hand the narrative to Washington or give the impression that U.S. firms are essential to fixing their markets. So what do they do? They stall. They “consider” things. They leak news to gauge reactions. And in the meantime, everyone from Western investors to Chinese regulators is just standing around trying to figure out whether this is legit or just another bait-and-switch. 

(Source: Wall Street Pit) 

On the other hand, Citadel, to its credit, saw this coming and applied back in January to set up a brokerage unit in China. Which means, if we took anything from Robinhood shafting us, courtesy of Ken Griffin… It tells us that Citadel isn’t dumb. It knows that if this door opens, even halfway, the first movers get the real estate. But again, none of this is guaranteed. The China Securities Regulatory Commission is still in “talks”.  Which is usually a sign that the decision is either being walked back or getting buried under layers of internal B.S. 

The moral of the story here? Even when China dangles financial liberalization, it’s conditional. It’s temporary. It’s always subject to political whims. This isn’t about market efficiency or investor protection. It’s about control. And the second that control feels threatened, by say, Trump and the U.S. of A., it’s game over. So yeah, even though this could be a big moment for China’s capital markets—bringing in real liquidity, lower costs, and help turn the ETF market into something functional—it won’t happen unless Beijing decides it can spin this as a win for itself. 

(Source: Giphy) 

And with tariffs hanging as the backdrop of all this, with Trump’s “Chad” energy in overdrive, that’s a long shot. Of course, do what you will with that information, but if the tariff solution comes soon—at least you and I won’t be the only ones getting pounded by market makers like Citadel and Jane Street. Until next time, friends… 

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Stocks.News holds positions in Robinhood as mentioned in the article.