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Nation weighs derivatives market

By Wang Zhenghua (China Daily)
Updated: 2007-03-08 08:50

China needs to develop a financial derivatives market in order to reach its goal of becoming a leader of international finance, the head of the country's financial futures exchange said yesterday.

General Manager of the China Financial Futures Exchange Zhu Yuchen said that the country should speed up the development of the financial derivatives market, including futures and options.

"For a long time, our practice has been strengthening supervision in the financial market, but the current problem is that, in an open environment it becomes impossible to keep this very isolated 'island'," Zhu said during the Fifth Session of the 10th National People's Congress yesterday.

"Emerging markets, including China, are at the most risk, because these markets are only half open. Major international investors are seeking opportunities in these markets, which are most vulnerable," he added.

These remarks came one day after regulators announced the country would launch stock index futures in the first half of this year. Officials had previously said they might initiate the trading of stock index futures early this year.

But the Shanghai-based China Financial Futures Exchange founded last September is apparently taking a cautious approach to the introduction of index futures. Singapore's futures exchange has already begun trading financial futures contracts based on Chinese stocks, and yuan derivatives are traded in the United States.

Zhu said that if China fails to take measures to control the situation or fails to make good use of its home-base advantage, it could lose these strategic resources to overseas markets.

"Gaining an advantage in financial derivatives ensures a leading role in the market," Zhu said.

Today, China is the only nation without financial futures among the top 20 countries in terms of gross domestic product. Futures also provide an economic resiliency.