Derivatives, including futures, options, spur integration with global arena

More futures products in the pipeline for foreign investors in China signify all-round opening up of the country's financial derivatives market, which will offer greater market access and more investment options and will help further integrate the Chinese market into the global financial arena, officials and industry experts said on Friday.

Preparations should be accelerated so that overseas investors under the Qualified Foreign Institutional Investor (QFII) program and renminbi QFII program can have greater access to trading in commodity futures, commodity options and stock index options, said Fang Xinghai, vice-chairman of the China Securities Regulatory Commission, at the 19th Shanghai Derivatives Market Forum.

Efforts should be made to allow overseas investors to take part in the trading of more commodity futures like oil and oilseeds futures in China; and the two-way opening up of China's government bond futures should be further advanced, said Fang.

More futures products will be launched to strengthen the weak links in China's industrial chains and serve the country's green development, he said.

Nearly 2.98 billion lots of commodity futures were traded in the first half of this year, accounting for 69 percent of the world's total. This made China the world's largest commodity futures market, Fang said.

Tian Xiangyang, chairman of the Shanghai Futures Exchange, said supply and demand in the Chinese market should be better reflected in the global pricing system.

China's strength in terms of its large market size can be thus translated into competitive edge in the global market, he said.

Product innovation will be increasingly emphasized in the next few years as natural gas, refined oil and electricity futures are expected to be launched to help the oil and gas industry better cope with volatility in global prices, said Tian.

Futures for new energy products such as power battery materials, hydrogen and ammonia will be developed to facilitate China's green transformation, he said.

Market insiders said internationalization has become a buzzword in the Chinese capital market in recent times. In October 2021, the CSRC allowed QFIIs to trade in futures and options in the Chinese onshore market.

In all, seven Chinese futures products have been made accessible to international investors so far, including futures for palm oil, copper and low-sulfur fuel oil. The yuan-denominated crude oil futures product was unveiled in 2018 as the country's first international offering of its kind.

"China's derivatives market has lived up to market expectations by rapidly enriching the product portfolio as well as effectively increasing market activity and liquidity. The introduction of various international contracts has allowed more global institutions to directly participate in the Chinese onshore market," said Yang Ruiqi, head for global markets at United Overseas Bank (China).

Yang said that with the participation of international investors increasing, more global market elements are now reflected in Chinese pricing, which will help enhance the influence of the Chinese prices in the global market.