Bright future for China's futures market with ambitious plans

Huang Yixuan
The China Securities Regulatory Commission pledges to expand the opening of specific futures varieties and broaden the range of QFII and RQFII investments.
Huang Yixuan

China will further expand the opening of specific futures varieties and broaden the range of Qualified Foreign Institutional Investor (QFII) and RMB Qualified Foreign Institutional Investor (RQFII) investments.

Fang Xinghai, vice chairman of the China Securities Regulatory Commission, said on Thursday via video connection at a derivatives forum held in Shanghai that the country's futures market will continue to serve the real economy by providing effective price signals and risk management tools for enterprises.

Of the 95 commodity futures and options currently listed, more than half are primary products. The futures market is essential for guiding enterprises in arranging future primary product production and sales, Fang noted.

For instance, agricultural companies can use forward prices of corn and soybean futures, combined with national grain subsidies, to determine annual planting varieties and quantities. Meanwhile, livestock companies can utilize pig futures price signals to calculate breeding profits and reasonable slaughter plans.

It is an effective tool for transmitting macroeconomic policy intentions as well, as demonstrated by the rapid release of pig futures price signals after the release of China's frozen pork storage signal this year.

Fang also mentioned the "insurance + futures" model which has been explored since 2016, transferring price risk from producers to the futures market and providing price and income guarantees for more than 2.9 million farmers in more than 1,300 "insurance + futures" projects.

Physical delivery is the foundation of China's commodity futures market, as it allows futures' financial and commodity attributes to ultimately return to the supply and demand side of the spot market, he said. The futures exchanges' delivery standards, quality premiums, and reasonable layout of delivery warehouses have protected futures delivery quality, security, and efficiency.

Keep prices stable

Moving forward, the CSRC will continue to promote the development of the futures market, and serve the national primary product supply and price stability.

The commission has pledged to focus on continuously improving market operation quality and expanding the breadth and depth of the futures market's opening to the outside world.

So far, 23 specific futures products have been opened to foreign traders, and 39 commodity futures and options products have been opened to QFII and RQFII, with primary product categories accounting for 96 percent and 70 percent, respectively.

It plans to steadily expand the opening of specific futures products, broaden QFII and RQFII investment scope, and attract more foreign institutions to fully participate in China's primary product futures pricing. This will enhance the representativeness and influence of China's futures prices and provide more accurate price signals for industrial enterprises.

Fang also emphasized that the CSRC will strengthen supervision and maintain market order by cracking down on illegal activities such as market manipulation and over-speculation, aiming to create a more standardized, transparent, and open price discovery and risk management environment for enterprises.

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