More futures trading products and other derivatives will be gradually developed in China, said Yang Maijun, director of the futures regulatory department of the China Securities Regulatory Commission (CSRC), 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 large growth potential. The authorities are supportive of innovation in the market, which has been developing quickly over the past two years, Yang said.
An industry overhaul rebuilt market order after a slew of speculation and fraud scandals in the mid-1990. Last year's recovery was strong, with the three futures exchanges reporting record turnover of 10.8 trillion yuan (US$1.3 trillion).
Turnover in the first half of this year shot up to 8.5 trillion yuan (US$1.0 trillion), a 115.7 percent increase year-on-year.
However, the scale and product diversity of China's futures markets are still limited, said Yang.
A unified settlement system will also be established to increase the operational efficiency of the futures market.
Sharp fluctuations in commodities prices on international markets should encourage Chinese companies to enhance risk control, and regulators will gradually promote new futures, securities-related products and financial derivatives.
To lay a solid basis for the reforms, China will improve the legal and regulatory systems surrounding the futures industry and enhance investor education. 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 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 in fuel oil futures, which should be ready in about a month. The exchange has not announced a definite launch schedule.
The Dalian Commodity Exchange is also applying for corn futures, although an exchange spokesman said Thursday that it was still awaiting the regulator's approval.
Corn is more sensitive than cotton and fuel oil owing to the potential impact on grain price reform. But Yang said that market demand for crop futures to hedge risks brought by the price fluctuation in international markets is obviously big.
Soybean and soy meal futures, for example, have seen very active trade, reporting 63 million transactions and 22.6 million transactions, respectively, in the first six months. That was the top figure for all futures products during the period.
(China Daily July 2, 2004)
