Money

Official: Increase ties with global futures exchanges

By Chen Jia (China Daily)
Updated: 2011-02-10 11:00

BEIJING - Chinese futures exchanges should increase cooperation with overseas futures institutions and play a more significant role to influence international commodity prices in 2011, Liu Xingqiang, president of Dalian Commodity Exchange, told China Daily.

Futures exchanges in the country will have more opportunities to implement the strategy of "going out" during the 12th Five-Year Plan (2011-2015) period, said Liu. "Promoting international cooperation with overseas exchanges will help to enhance China's pricing power in global commodity markets," he said.

Traders work at the Dalian Commodity Exchange in Dalian, China. Liu Xingqiang, president of the exchange, called for more cooperation with international commodity futures exchanges to increase influence in global commodity prices. [Photo/Agencies]?

The trading volume of commodity futures in China has exceeded 50 percent of the total global futures trade volume last year. In 2009, China contributed 43 percent of the global commodity futures trading volume, thus becoming the biggest commodity futures market in the world, according to China Securities Regulatory Commission.

"Commodity prices in the Chinese market are mainly determined by overseas commodity prices now, which increased the risks of imported inflation," said Liu, who sees futures as a key to influence the spot prices of commodities in a market economy.

According to the Dalian Commodity Exchange, after the United States announced a $600 billion quantitative easing policy, prices of soybean futures contracts on the Chicago Board of Trade increased by 8.3 percent in a week, which contributed to a 4.88 percent rise in the prices of soybean futures on the Dalian exchange.

Similarly, a 10.5 percent price surge in palm oil futures on the Bursa Malaysia Derivatives lifted Dalian's palm oil futures price by 8 percent, said the exchange.

In 2010, the import value of raw materials, including crude oil, steel and iron ore, increased by 42.1 percent, and the surge in international commodities prices has resulted in a rise in the value of domestic raw materials by 38.1 percentage points, reported the Ministry of Commerce.

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"Our futures exchanges should go for cross-border mergers and acquisitions, which will help in increasing pricing power and make our exchange's trading rules more influential globally," said Liu.

Liu suggested Chinese futures exchanges buy stocks of foreign exchanges and participate in trading of overseas listed future contracts.

Increasing institutional investors and introducing more commodity futures contracts could also accelerate the internationalization of the Chinese futures market, Liu added.

The Dalian Commodity Exchange has signed cooperative agreements with the Chinese Coking Industry Association to prepare for the launch of coke futures, the exchange said on its website.

The total value of futures trading in China last year reached 308.665 trillion yuan ($46.88 trillion), a year-on-year increase of 136.51 percent, a report from the China Futures Association showed.

In 2010, the value of futures trading at Shanghai Futures Exchange accounted for 40 percent of the total trade value. The China Financial Futures Exchange held 26.47 percent, Zhengzhou Commodity Exchange accounted for 20 percent and Dalian Commodity Exchange 13.51 percent, the China Securities Journal reported.