This week, I am occupied with assignment and time lag. Everyone is likely to wait until U.S. government re-open. Let me talk something else in the waiting period.
A good news for Chinese commodities futures industry : the set-up of new Shanghai free-trade zone.
It is reported that central government of China plans to allow foreign commodities exchanges to set up delivery warehouses in the mainland’s first free-trade zone in Shanghai and help Hong Kong Exchanges and clearing to expand into commodities trading. In the meantime, Beijing would also “gradually approve foreign firms to participate in commodities futures trading” in the free-trade zone which would be established in the Pudong New Area. This news may attract interested eye sight worldwide to the booming Chinese futures market.
To be honest, futures especially commodity futures are not always mainstream financial product in life of Chinese. Possibly, because of black history, higher risk exposure and lack of certain knowledge. However, it seemed like that Chinese futures market did wonderful performance in world stage silently. I am surprised to see a research paper which indicated Chinese future market joined the ranks of the world’s most actively traded futures. In year 2011, the three most active agricultural futures in the world by contract volume were Chinese-the ZCE (Zhengzhou Commodity Exchange) cotton and sugar contracts and SHFE (Shanghai Futures Exchange) rubber futures. Out of the top ten agricultural contracts by volume, seven were Chinese.
Black History
China built its first true futures exchange in 1993 and soon boomed. The over fast and early boom buried evil seed for the futures. Fraud and price manipulation prevailed in chaotic environment. After the notorious scandal in the bond futures contract (the “327”event), China Securities Regulatory Commission close down 80% futures brokers of the 1000,with only three exchanges remain. Until 1990’ did the futures market start to grow under reform and rationalizition.
Today
Overview of Chinese futures volume
Chinese futures market experienced up and down during its development. The big country has great potentials, so does the futures market. However, running may not be Chinese style, to walk step by step is more rational choice.
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