BIZCHINA / News
New regulations clear way for financial futures
(China Daily)
Updated: 2007-03-20 10:04
Financial futures are poised to return to China's market after being
banned for almost 12 years.
According to a new set of regulations governing futures trading,
announced on Saturday, financial futures, which include interest rates,
foreign exchange rates and stock indices, can now be traded.
Professionals in the financial industry cheered. Some economists are
worried. But most people simply ignored the news because there are not
many links between their lives and these highly technical finances.
However, for China's millions of stock investors, this could be a
far-reaching development. Stock market index futures, which will offer
money-making opportunities for those betting on different market
movements, will help iron out fluctuations in the stock market.
Financial futures are also important for those planning China's financial
reforms because it will be very difficult to push for further
liberalization of interest rates and the foreign exchange rate in a
shallow financial market. Currently, neither the interest rate nor the
foreign exchange rate is completely determined by the market. But China
has to achieve this market link if it wants to allocate its financial
resources more efficiently. Opponents of reopening the financial futures
market believe the financial market's institutional infrastructure is
still not strong enough to support the complicated and, possibly,
speculative business.
Indeed, the treasury bond futures market's debacle in 1995 remains a
vivid reminder of the shocks and losses a loosely-regulated market can
cause. The market drama, brought about by a brokerage attempt to
manipulate the market, directly led to the closure of the two-year-old
market.
However, opponents must admit that regulators have been drawing on the
experience gained through operation of the markets in stocks, futures,
and foreign exchange, both positive and negative.
It is certain that regulators will take a cautious, incremental approach
in developing the market.
The needs of a maturing financial industry, and, indeed, of the entire
economy justify a new start with the financial futures market.
Opposing the market's reopening will not necessarily mean more financial
security. The scarcity of advanced financial tools in an increasingly
sophisticated economy will actually add to financial risks in the form of
huge swings in the stock market and low quality banking assets.
(For more biz stories, please visit Industry Updates)
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