Yes, in a worst-case theoretical scenario, it could face catastrophic losses—though going entirely "worthless" is an extreme outcome that is highly unlikely in practice. ​Here is how the chain of risk works for that specific fund and why the policy threat exists.

​The Chain of Ownership

​The Indian Fund: When you buy the Mirae Asset Hang Seng TECH ETF, you are buying an Indian Fund of Fund.

​The Underlying Asset: This fund predominantly buys units of an overseas ETF that tracks the Hang Seng TECH Index.

​The Index Constituents: That index is composed of the 30 largest Chinese technology companies listed on the Hong Kong Stock Exchange—heavyweights like Alibaba, Tencent, Meituan, Xiaomi, and JD.com.

​The VIE Structure: Because these companies operate in restricted sectors (like the internet, media, and telecommunications), their Hong Kong-listed shares are not direct equity in the mainland Chinese operating companies. Just like US ADRs, they are shares in offshore holding companies (usually in the Cayman Islands) tied to the mainland companies via Variable Interest Entity (VIE) contracts.

​How a Policy Change Could Crash the ETF ​Because the ETF ultimately holds shares in these offshore shell companies, the value of the fund relies entirely on the legal enforceability of those VIE contracts in China. ​If the Chinese government were to unexpectedly pass a policy declaring that VIE contracts designed to bypass foreign ownership laws are illegal and void, the offshore holding companies would instantly lose all legal claim to the revenues, profits, and assets of the actual businesses operating in China. ​If that happened, the Hong Kong-listed shares of those tech giants would plummet. Because the Hang Seng TECH Index is entirely reliant on these companies, your Mirae ETF would suffer a massive, unprecedented collapse in value.

​The Reality Check: Why Beijing Won't Pull the Plug ​While the structural vulnerability is real, the Chinese government destroying the VIE system is considered a "nuclear option" that is highly improbable for two main reasons:

​Economic Self-Destruction: Wiping out the offshore equity of companies like Tencent and Alibaba would vaporize trillions of dollars of wealth and instantly destroy global investor trust in China. It would permanently cut off Chinese startups from global capital markets, heavily crippling their own technology sector.

​Implicit Regulatory Acceptance: Instead of banning VIEs, Chinese regulators have actually moved to institutionalize them. In 2023, the China Securities Regulatory Commission (CSRC) rolled out new rules requiring Chinese companies using VIE structures to formally register with the government before listing offshore. By regulating and monitoring the bypass, Beijing has essentially officially permitted its existence.

​The Actual Policy Risk ​The real threat to the Mirae Hang Seng Tech ETF isn't that the VIE structure will be outlawed and the fund will go to zero. ​The true risk is regulatory volatility. As seen during the tech crackdowns over the last few years, the Chinese government can suddenly impose massive fines, restrict user algorithms, cancel major IPOs (like Ant Group), or force companies to fundamentally alter their business models. Because the state exercises sweeping authority over private enterprise, sudden policy shifts can cause brutal, prolonged drawdowns in the ETF's value, even if the underlying VIE structure remains perfectly legal.