Futures exchanges ready for new products
By Sun Min (China Daily)
Updated: 2004-03-08 08:36

The country's futures exchanges are stepping up preparation for new products as China's futures market recovers and the demand for more futures products increases.

Corn futures could soon come onto the market as early as April or May, and cotton futures may also get the green light shortly.

"We are actively preparing for the corn futures. We have been lobbying for more than four years," said Zhu Yuchen, president of the Dalian Commodity Exchange, one of three futures exchanges in China.

"We are not sure of the timetable yet, since it needs final approval from the State Council, but hopefully it will be approved in April or May. Or if regulators need more time, it may be settled in autumn," said Zhu on Saturday in Beijing.

As one of the few representatives of the securities and futures industry at the 10th National People's Congress, Zhu submitted several proposals to the legislature over the weekend.

The proposals suggest that China should amend the provisional regulation on futures trading management enacted in 1999, which set up many barriers including prohibiting futures brokerages from making investments for their own profit or take part in overseas trade.

Product innovation is also limited by the rule. Zhu said the procedure to launch a new futures product should be simplified and the exchanges themselves should have more say in the process.

Dalian, a northeastern port city, will first try to promote more agricultural commodities, based on agricultural strength of Northeast China.

The exchange is also expected to launch a new soybean contract very soon, which would further enrich its soy product series, insiders said.

Such agricultural products need a more developed futures market to hedge risks in possible price fluctuations, especially since China has reformed the crop circulation system and required farmers and enterprises to be more aware of the market trend, said Zhu.

Moreover, Chinese commodities prices are also becoming increasingly linked with the global market and are closely monitored by many foreign traders.

The opening-up of the futures market is unavoidable, said Zhu.

Though no foreign companies are allowed to conduct futures trading within China now, some of them are already indirectly participating in the market as important clients for Chinese enterprises.

"We may also consider making some of the foreign companies special members of our exchange, though they still cannot be dealers," said Zhu.

They may be either foreign producers or consumers of the commodities that are traded in China.

Other futures exchanges, such as Zhengzhou Commodity Exchange in Central China's Henan Province, are also devising innovative plans.

While Shanghai is preparing for fuel oil futures, the Zhengzhou Commodity Exchange has been applying for cotton futures, which is also in progress and may be allowed within the year, or even in the first half of the year.

Ji Guangpo, a manager at the marketing department of the exchange, said the exchange also has a new wheat contract to be launched and has been studying new products like sugar and rapeseed.

The pace of product innovation is controlled by regulators, he said.

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