SHANGHAI May 28 China is aiming to launch its
first crude oil futures contract this year, the vice chairman of
the securities regulator said on Wednesday, a move that would
give the world's second-largest oil consumer greater influence
in global pricing.
The long-delayed contract, proposed by the Shanghai Futures
Exchange (SHFE), will be China's first commodity futures
contract that allows participation from overseas institutional
investors without setting up a local subsidiary.
The crude oil contract has been delayed since 2012.
Investors are closely watching its proposed launch as the
yuan-denominated contract, which will allow foreign investors to
settle in U.S. dollars, would mark a milestone in China's
liberalisation of its capital markets.
Jiang Yang, vice chairman of The China Securities Regulatory
Commission (CSRC), said at an industry conference preparatory
work for the contract is largely complete and that the exchange
will step up coordination with other regulatory bodies to ensure
its timely launch.
The contract needs approval from several bodies, including
China's foreign exchange regulator as the Chinese yuan cannot be
Local media reported on Monday that the State Administration
of Foreign Exchange may give foreign investors a daily foreign
exchange quota of above $5 billion per day for crude futures
trading, higher than the amount proposed by the SHFE in its
Citing anonymous sources, the official China Securities
Journal said the regulators will need to ensure overseas
investors are given sufficient quota to meet their trading
requirements, including replenishing capital.
China hopes the contract will become a benchmark in Asia and
a successful launch could pave the way for the opening of other
commodities derivatives, such as the actively traded copper and
soybean futures, to more foreign investment.
Under current plans, the physically deliverable oil contract
will use the type of high-sulfur crude grades that China mostly
imports. The contract pricing will exclude custom tariffs and
value-added tax and allow for physical delivery in bonded
storage areas, according to the exchange.
According to draft rules by the SHFE, overseas investors
will have a choice on whether to settle their trades in the
Chinese yuan or U.S. dollars.
(Reporting by Fayen Wong; Editing by Muralikumar Anantharaman)