Opening up China’s futures markets to foreign investors should give China greater influence over the way prices are set for commodities, says a senior government official.

 

China Securities Regulatory Commission (CSRC) vice president Fang Xinghai notes that the Chinese government plans to accelerate the opening up of China’s futures market to more participants.

 

“China will introduce new investors into the market at a steady pace.  Nowadays, foreign companies in onshore spot market have a strong need for futures products to hedge risk,” says Fang in a speech published on the CSRC website.

 

“International and popular future contracts like crude oil, iron ores, and rubber futures will be first available, followed by other products. In addition, overseas office and clearing centres will be set up” Fang said in a forum on regulations covering derivatives market.

 

Fang adds that China is trying to attract more local companies and financial institutions to trade commodities futures. Currently, commercial banks in China are only allowed to trade gold and silver future contracts even as their high net worth clients require other commodities to trade for hedging purposes.

 

“As a result, many of the commercial banks choose to trade future contracts in overseas market, which is costly and risky. Therefore, we will release the restrictions on the futures market to encourage more companies to participate,” says Fang.

 

CSRC has already been in talks with regulators from at least 58 countries to boost relations in the futures market.