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Officials foretell new futures markets
By Sun Min (China Daily)
Updated: 2004-07-02 01:06

More futures trading products and other derivatives will be gradually developed in China, Yang Maijun, director of the futures regulatory department of the China Securities Regulatory Commission (CSRC), said Thursday.

The long-awaited fuel oil futures should start trading in Shanghai in about a month, he said at a financial forum in Beijing Thursday.

Regulators are also studying ways to let foreign institutions take part in the domestic market.

China's futures market has a large growth potential. The authorities are supportive of innovation in the market, which has been developing quickly over the past two years, he said.

An industry clean-up rebuilt market order after a slew of speculation and fraud scandals in the mid 1990s.

China's futures industry reported a strong recovery last year. The three futures exchanges saw a record turnover of 10.84 trillion yuan (US$1.31 trillion) during the year, according to official statistics.

Turnover in the first half of this year shot up to 8.47 trillion yuan (US$1.02 trillion), a 115.7 per cent increase on a year-on-year basis.

However, compared to mature markets, the scale and product diversity of China's futures markets are still limited, said Yang.

Big fluctuations in commodities prices on international markets should encourage Chinese companies to enhance risk control.

Regulators will gradually promote new futures, securities-related products and financial derivatives, Yang said.

A unified settlement system will also be established to increase the operational efficiency of the futures market.

To lay a solid basis for the reforms, China will try to improve the legal and regulatory systems surrounding the futures industry and enhance investor education, he said.

This will allow more qualified domestic enterprises and professionals to conduct overseas futures trading for risk hedging.

"We will also study access for overseas institutions (wanting) to take part in the domestic futures market," Yang said.

CSRC, the securities and futures watchdog, has approved two new futures products so far this year -- cotton, which was launched on the Zhengzhou Commodity Exchange last month, and fuel oil.

The Shanghai Futures Exchange is still making final preparations for the trade of fuel oil futures, which should be ready in about a month's time, Yang told China Daily.

The final schedule of the launch is up to the exchange, he said.

The Dalian Commodity Exchange is also applying for corn futures, though an exchange spokesman said Thursday that it is still awaiting the regulator's approval.

Compared to cotton and fuel oil, corn is more sensitive due to the potential impact on the crop price reform. But obviously the market demand for such crop futures to hedge risks brought by the price fluctuation in international markets is big, he said.

Soybean and soymeal futures, for example, have seen very active trade, reporting 63 million transactions and 22.6 million transactions respectively in the first six months, which led all futures products during the period.

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