China's first photovoltaic industry exchange-traded fund (ETF), launched by Huatai-PineBridge Fund Management Co in December attracted hot demand, with assets under management jumping nearly six-fold in just a month to 10 billion yuan ($1.55 billion).

A slew of mutual fund houses are following suit, with Yinhua Fund Management Co raising money for a rival product this week while Tianhong Asset Management Co plans to launch an index fund that invests in solar power companies next Monday. More green energy funds are in the pipeline.

The funds will likely bring more money into an already red-hot sector. China's new energy index doubled last year, pushing up the sector's earnings multiples to almost 90 compared with 22 for Chinese stocks broadly.

"Renewable energy is the only option for the human race in the combat against climate change," said Richard Pan, portfolio manager at China Asset Management Co (ChinaAMC).

Pan, who made lucrative investments in battery maker Contemporary Amperex Technology Co (CATL) and solar equipment maker Tianjin Zhonghuan Semiconductor Co, said the government's green pledges and China's strong competitiveness in new energy means the industry has much more room to grow.

President Xi has vowed to make China, the world's biggest emitter of carbon dioxide, carbon neutral by 2060. The commitment will require more than $5 trillion of investment in renewable power and other sectors, consultancy Wood Mackenzie estimates.

Xi also pledged to raise wind and solar capacity to 1,200 gigawatts by 2030, more than double the current level.

China's "energy revolution" will boost solar power, said Kai Wenming, analyst at New Times Securities, who forecast a 67.3% capacity expansion this year.

Investors are also encouraged by the fact that technological advances helped slash solar production costs by 90% over the past decade, weaning the industry off government subsidies, said Liu Xiaoming, who will manage Tianhong's new photovoltaic fund.

Other funds preparing to launch solar energy funds include Harvest Fund Management Co, Guotai Asset Management Co, and Penghua Fund Management Co.

But soaring stock prices are fuelling fears of a bubble, with China's new energy index already jumping over 8% in the first two trading days of 2021.

"The sector's prospect is bright, but valuation is too high," said Stephen Huang, vice president at Shanghai See Truth Investment Management Co, a hedge fund house.

"We're seeing too much exuberance."

(Reporting by Samuel Shen and David Stanway; Editing by Ana Nicolaci da Costa)

By Samuel Shen and David Stanway