Chinese Mandarin - Promising future for futures exchange

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BIZCHINA / Weekly Roundup

Promising future for futures exchange

By Wang Lan (China Daily)
Updated: 2007-09-17 14:45

The prices of natural rubber futures contracts traded on SHFE have also
become the major force leading the global market trend. Analysts say
enthusiasm for foreign investors to participate in China's natural rubber
market has also reaffirmed its global influence.

"More and more institutional investors and futures traders from Japan are
coming to Shanghai to seek exchanges between the two markets," says Lin
Hui, a natural rubber futures analyst at China International Futures
(Shanghai) Co. "Attracted by the increasing pricing power of natural
rubber in Shanghai, foreign investors hope to be more deeply engaged in
China's booming market."

SHFE last year surpassed the Tokyo Commodities Exchange (TOCOM) to become
the world's largest natural rubber futures market in terms of trading
volume. In 2006, the trading volume of natural rubber futures on SHFE
amounted to 260 million tons, well above the 48 million tons traded on
TOCOM.

Pricing center

Industry analysts say China's position as the largest natural rubber
consumer has catapulted SHFE to the position of the commodity's pricing
center. In 2006 alone, China's consumption of natural rubber totaled 3.8
million tons, accounting for one-fifth of the aggregate global
consumption. The import of natural rubber also increased 14.6 percent to
1.6 million tons from a year earlier, according to statistics from the
China Petroleum and Chemical Industry Association.

Analysts forecast the trading of natural rubber on SHFE will become more
and more active in the following years, as the auto industry in China
continues its growth momentum. SHFE's enlarged trading scale and the
expanded product range since its establishment in 1999 has also largely
increased its importance in pricing in some of the global markets.

Statistics compiled by SHFE show that between 1999 and 2006, the
exchange's combined trading value of all futures products increased 23
times to 12.61 trillion yuan. In the first seven months of 2007, the
trading value rose 77.37 percent to 12.79 trillion yuan, exceeding the
total turnover in 2006.

SHFE is currently trading a range of futures products, including copper,
aluminum, zinc, fuel oil and natural rubber, and has received the
go-ahead to trade gold.

Given its fast-growing importance in global consumption and production of
various commodities, China has great potential for expanding the scope of
its commodity futures markets. Bao Jianping, head of research and
development center of SHFE, says further effort should be made to create
a more conducive environment for product innovation and to quicken the
pace of developing the domestic commodity futures market in keeping with
the growing size of the national economy.

(For more biz stories, please visit Industry Updates)

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