May 12, 2006 (China Knowledge) – The Chinese government is considering giving foreign investors limited access to trade commodity futures contracts in order to pave the way for the futures and derivatives exchange, according to Xinhua.
China plans to offer stock index futures, bond and interest rate futures and currency derivatives through a financial derivatives exchange to be based in Shanghai, sources said.
Analysts suggest that foreign investment needs to be allowed in futures first before launching the new exchange for financial futures and derivatives. Otherwise, there would not be enough liquidity in financial futures; they need to lay the legal groundwork first. However, QFIIs have not been allowed to enter China’s futures market yet.
Currently, direct trade by foreign institutional investors are only allowed in RMB-denominated A-share markets and bond markets in China under the QFII plan. The QFII plan limits overall investment to US$10 billion, of which US$6.57 billion has been allocated.
Source: China Knowledge
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