The Development and Challenges of China’s Futures Markets

Abstract

The futures market in China started in the early 1990s as the economic reform deepened. After two decades of development, there are now four futures exchanges: Shanghai Futures Exchange, Dalian Commodity Exchange, Zhengzhou Commodity Exchange, and China Financial Futures Exchange. Product innovations and regulatory changes largely contribute to the rapid expansion of the market. Several futures contracts are now among the most active contracts in the world market. With development of its futures market and efforts to open up the market to investors overseas, China’s pricing power in the global commodity market has improved over time.

Keywords:

• Chinese futures markets
• emergence of futures markets
• regulations

Notes

See Williams et al. (1998) for a detailed review of the emergence of the Zhengzhou Commodity Exchange in the early 1990s.

FIA Annual Volume Survey (Available at http://www.futuresindustry.org/volume-.asp).

Exchange bulletin, November 24, 2010, Dalian Commodity Exchange website. (Available at http://www.dce.com.cn/portal/info?cid=1272437227100&iid=1290566059100&type=CMS.OPERATION_NOTIFY); Exchange bulletin, November 25, 2010, Shanghai Futures Exchange website (Available at http://www.shfe.com.cn/news/notice/10252865.html).

See Fung, Wu, and Yau (2013) for a detailed review of the ongoing internationalization of the RMB.

“Analysis: China futures market accelerating innovation to promote steady growth of economy,” Xinhua Economic News Services, September 28, 2012; “China funds, brokerages embrace commodity futures as rules relax,” Hedge World Daily News, October 11, 2012.

“China outstanding QFII quota at $56.5 bln in June,” Reuters, June 30, 2014 (Available at http://www.reuters.com/article/2014/06/30/china-investment-qfii-idUSB9N0P600R20140630).

“Dalian iron ore futures debut as China seeks pricing power,” Bloomberg News, Oct 18, 2013 (Available at http://www.bloomberg.com/news/2013-10-17/iron-ore-futures-debut-in-dalian-as-china-seeks-pricing-power.html); “China launches iron ore futures market,” Weekend Australian, October 19, 2013.

“First crude oil futures market to open in FTZ,” China Daily European Edition, December 11, 2013; “Overseas exchanges expect to participate into China’s futures market innovation,” Xinhua Economic News Service, December 2, 2013.

Futures exchange news, Shanghai Futures Exchange website, May 21, 2014.

“Shanghai speeds up crude futures debut as competitors lurk,” Bloomberg, May 28, 2014 (Available at http://www.bloomberg.com/news/2014-05-28/shanghai-exchange-to-start-crude-futures-as-soon-as-possible-.html).