Interbank money market opening urged
By Chang Tianle
Updated: 2004-04-19 08:43

China's interbank money market should eventually open to all institutional investors and trade more products, including derivatives, said a top official with the Shanghai Foreign Exchange Trade System (SFETS).

"More trading products are needed in the interbank market," said Lin Yuli, president of SFETS, at the China Money Market forum held in Shanghai on Saturday to celebrate SFETS' 10th anniversary.

So far, the interbank market only provides spot transactions, but has no derivatives for members to hedge risks.

"In terms of the renminbi interbank market, there is a lot to do to promote qualified commercial banks to issue financial bonds as well as promote the corporate bond market and securitization of credit assets," she added.

She also said in the long term, all institutional investors should be able to participate in the market, including non-financial institutions when everything is ripe.

Shanghai-based CFETS is a subsidiary of the People's Bank of China. Established in 1994, CFETS provides renminbi foreign exchange transactions, renminbi interbank borrowing and lending and the bond dealing system, as well as clearing and settling services.

China's interbank foreign exchange, funding and bond markets have witnessed rapid growth in the past decade. The accumulated amount of foreign exchange market transactions surged from US$4.08 billion in 1994 to a record high of US$151.1 billion last year. Renminbi interbank funding and the bond market have grown from 580 billion yuan (US$70.5 billion) in 1996 to 17.2 trillion yuan (US$2.1 trillion) in 2003.

It now has 347 members in the foreign exchange market and 948 in its funding and bond market.

Lin said the CFETS has played an important role in creating the mechanism for setting the reminbi exchange rate and keeping it stable.

Looking ahead, CFETS aims to become a trading and pricing centre of renminbi-related products.

To achieve the goal, Lin said trading efficiency should be further improved. CFETS will also cultivate and develop the market-maker base and perfect the trading mechanism.

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