China's derivatives market developed as a result of the inflow of US dollar-denominated debt into its state-owned enterprises' (SOEs) in the 1990s. This inadvertently resulted in a demand for foreign and local currency interest rate swaps to manage liabilities and hedge renminbi risks. But it was only the four state-controlled banks that were allowed to trade local and foreign currency denominated derivatives. A decade on and things have not changed much.
Despite the absence of an onshore li