Opening China's derivatives door

China has no onshore listed derivatives market and its mainland stock markets were among the world's worst performers last year. But despite these challenges, foreign investment banks are moving in, adamant that a lucrative equity derivatives market is just on the horizon. Shamillia Sivathambu investigates

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