China to open futures market to foreign investors

The Chinese government may relax its rules to encourage foreign investors to enter the country's lacklustre futures market, with ABN Amro the first to move.

China's 12-year-old futures market is facing declining trading volumes, falling 13% to 10.8 billion renminbi in the first 10 months of 2005.

Fan Fuchun, the vice-chairman of the China Securities Regulatory Commission, said yesterday that foreign investors would help to improve the Chinese market. Qualified foreign institutional investors (QFIIs) are already allowed to act as brokers and investors in the Chinese stock market, but not the futures market. In early 2003, the CSRC ruled out foreign investment in futures, pointing out that in any case the market was too small for them to be interested.

The three Chinese futures exchanges in Dalian, Shanghai and Zhengzhou list nine commodity derivatives but no financial derivatives.

ABN Amro's Hong Kong branch received CSRC approval on Saturday to buy a 30% to 49% minority stake in the Chinese broker Galaxy Futures, making it the first foreign bank to be allowed into the Chinese futures market. Next year, changes in regulations would allow other mainland futures brokers to set up Hong Kong branches, making future joint ventures more likely, said CSRC futures supervision director Yang Maijun.