The national securities and futures regulator told
the first China International Derivatives Forum that the government
is considering the introduction of Qualified Foreign Institutional
Investors (QFII) into its futures market to try to boost the
sector.
"We will actively study the idea of introducing
QFIIs into commodities futures trading and gradually open the
futures market," said Fan Fuchun, vice chairman of China Securities
Regulatory Commission (CSRC) at
the two-day conference, which ended in Shenzhen, Guangdong Province
yesterday.
Some 700 representatives from futures firms,
futures exchanges, spot commodities traders, investment fund
institutes and technology firms in around 10 countries and regions
attended the forum.
"China's futures market is facing a historic
moment; we will seize this opportunity to push its development
through measures such as improving the legal system and being
properly prepared for the introduction of financial futures
products," said Fan.
He said that as the economy becomes increasingly
integrated with the global one, its need for risk management will
grow rapidly. This means the development of a fully functioning
futures market is an urgent task.
The futures industry, which began in China in 1993,
had a trading volume of 10,823 billion yuan (US$1,339 billion) in
the first 10 months of this year, down 13 percent on the same
period last year.
"The entry of QFIIs will certainly be a boost to
China's futures market, as it will force domestic players to
improve their performances," said Chen Xiaodi, a researcher at
China International Futures Co Ltd, the country's largest futures
brokerage.
"But they probably don't have a big appetite for
the market right now, as the choice for them is rather limited and
the volume of commodities trading is small," said Chen.
Only nine commodity items are currently traded in
China's three futures exchanges, but there is no trading of
financial derivatives.
Many experts say introducing financial derivatives
products is something that "cannot happen too soon" if the futures
market is to get a boost.
"Only after the derivatives market takes off will
QFIIs become really interested," said Chen.
Under China's WTO entry agreement, the futures
market is the only financial sector that has no set timetable for
its opening-up.
ABN Amro Bank NV, one of the world's largest banks,
became the first foreign institution to team up with a local
futures house, China Galaxy Futures Co Ltd, after it got the
go-ahead from the CSRC late last month.
The CSRC is also pushing for the revision of a rule
on futures trading, according to Yang Maijun, director of its
futures supervision department.
The existing rule enacted in 1999, said Yang, does
not "fit in with the development of the futures market" and
revising it would broaden business scope for futures companies.
According to the existing rule, futures companies
can only conduct brokerage business, seriously hampering their
growth.
But market observers expect that under the revised
rule, futures companies could conduct futures investment fund
management and custodian wealth management businesses.
A protection fund for futures investors is likely
to be inaugurated in 2006, according to Yang, a move that he said
would strengthen market confidence and spur the development of the
futures market by beefing up the protection of investors'
rights.
(China Daily December 5, 2005)