LME Canvasses CSRC to OK Overseas Futures Trading

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Last updated at: (Beijing Time) Thursday, October 17, 2002

LME Canvasses CSRC to OK Overseas Futures Trading

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An official of related securities regulatory department noted on Oct 15 that up to now over 10 enterprises have simultaneously filed application to the China Securities Regulatory Commission (CSRC) and the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) for overseas futures trading, the majority of which are metal enterprises. However, currently only 7 China's inland enterprises are allowed to deal in overseas futures transaction, as learned.

At the invitation of CSRC, chief officers of the London Metal Exchange (LME) came into contact on futures supervision with CSRC on Oct 15. When interviewed at the international seminar on metal futures business co-sponsored by LME and Futures Daily, LME chairman stated that one of the purposes of his China tour is to try to persuade CSRC to OK overseas futures trading to the interior enterprises.

China is one of the largest producers of metal, with copper, tin and zinc ranking the world's foremost in output, hence the huge market potential attracting LME. Chief executive Mr. Siemon once said LME attached great importance to China's hinterland market. According to his introduction, products of China's 34 metal manufacturers have been listed in LME. Nevertheless, LME, having finished the reform of corporate system, still vigorously strives to see China's mainland enterprises deal in futures in LME.

CSRC also made response: LME are invited to pass on futures supervision system, statutes as well as exchanges' risk control in Britain to CSRC staff members. As for issuing permission of overseas futures trading, it is not independently determined by CSRC.

The official explained procedures of applying for advance refunding and value preserving through overseas futures exchange. The first step is to simultaneously file application to CSRC and MOFTEC, which then report to the State Council after preliminary examination and consultation. And it is the State Council who approves of permission issuing.

At present, 7 large state-owned enterprises have gained the approval, 3 petroleum enterprises and 3 trade enterprises and China Minmetals Group, the only metal enterprise and also the only officially approved mainland enterprise to be listed in LME. At the same time, the State Council fixed the business arrangement of these 7 enterprises within advance refunding and value preserving, forbid them to engage in speculation and set demands on amount of value preserving.

The administrative authority imposes strict restrictions over state-owned enterprises to deal in overseas futures business, and bans mainland futures broker companies to act as agents to go in for overseas futures business. A seasoned figure in field of futures held the main reason is during the initial stage of futures development, the imperfect rules and regulations led to severe loss and massive drain of state-owned assets when mainland enterprises dealing in overseas futures transaction. At that time, due to under-standard operation, some HK and mainland futures broker companies brought about frequent infringements when making overseas transactions by proxy. Thus, the State Council made decisions to rectify futures market and shut down overseas futures dealing. Not until May 2001 did the State Council release the first list of state-owned enterprises that were permitted to deal in overseas futures business.

An unnamed futures personage claimed although the mainland is not open to overseas futures trading, some world-noted futures companies have already set up agencies, undertaking agent business for mainland customs to go in for futures transactions abroad.

By PD Online Staff Zhu Lizhen

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