Source: China Daily

12-05-2008 18:41

By Wang Lan (China Daily)

With a widening product variety and deepening liquidity pools, the mainland's futures market is playing an increasingly important role in serving the national economy.

Zhengzhou Commodity Exchange (ZCE), the first experimental futures market approved by the State Council, was established on October 12, 1990. The ZCE, which started with forward contract trading, launched its first futures contracts on five agricultural products - wheat, corn, soybean, green bean and sesame on May 28, 1993.

It still specializes in agricultural and chemical product futures, including hard white wheat, strong gluten wheat, sugar, cotton, rapeseed oil and PTA, a petroleum-based chemical product.

Three years after the establishment of ZCE, Dalian Commodity Exchange announced it would trade in futures contracts underlined by a variety of agricultural produce, mainly grown in Northeast China. So far, futures contracts on soybean, soybean oil, corn, palm oil, soymeal and LLDPE, a petroleum-based product, are traded on the Dalian bourse.

In 1999, Shanghai Futures Exchange was established and China's futures trading was expanded to metal and energy products. Now it deals in six futures products - copper, aluminum, zinc, gold, fuel oil and natural rubber.

The demand for commodity futures as hedging tools has been on the rise as the Chinese economy continues to advance at a brisk pace. The country is now one of the largest producers and consumers of a wide range of commodities, including oil, steel, copper, corn, wheat and soybean. To diversify their product ranges, the nation's three commodity futures exchanges are doing research to introduce new contracts.

For example, the Shanghai bourse plans to launch new contracts on nickel, silver and steel futures in the coming years. The Zhengzhou bourse is preparing to launch early long-grain non-glutinous rice futures, while the Dalian bourse is preparing to introduce hog futures to protect hog breeders from being exposed to sharp price swings.