China to open up futures market to foreign investors via free trade zones


China plans to gradually open up its futures market to overseas investors through free-trade zones, but no decision has been made yet on allowing the London Metal Exchange to set up a warehouse in the country, a regulatory official said.

China on Tuesday approved the formation of three FTZs, which will copy the model of the Shanghai FTZ established in 2013 as a testing ground for looser rules governing currency conversions and foreign direct investment.

Allowing LME warehouses in China will depend on the success in opening up futures market to overseas investors, Zhou Lichao, a director of the department of futures supervision of the China Securities Regulatory Commission, said on Wednesday.

“For now, there is no decision. I have not heard anything about it,” Zhou said on the sidelines of the FOW Derivatives World Asia conference in Hong Kong.

The ban on overseas commodity exchanges setting up warehouses in China was issued by the CSRC in 2008.

The LME has tried to extend its worldwide warehouse network to China over the past several years as the country’s consumption and production of metals rise and are a driving force for global prices.

The LME is the world’s biggest metals exchange. It is owned by Hong Kong Exchanges and Clearing.

In a bid to accelerate the process of opening up its domestic futures market, hina will allow foreign players to trade the country’s recently approved crude oil futures, Zhou told the same industry conference.

The CSRC approved the crude oil futures in December last year. The regulator in January this year also issued draft rules to allow foreign investors to trade in some of the country’s commodities futures, which Zhou said was being discussed by Chinese legislators.

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