The Strategist

China To Open Its Market Doors To The Global Investors

03/31/2015 - 07:54

The Shanghai International Energy Exchange is about to open its crude oil futures trading in the global market. Investors and commodity holders see positive future potentials in Chinese market.

Hainan, China (Xinhua)- 29 March 2015- In Chinese trade market, according to BOAO forum, the Shanghai International Energy Exchange, addressed as INE in brief, announced its intentions on shortly commencing trading, mostly towards the end of this year. The country, it is said, will open its market for as a platform also for any foreign exchange. The Chairman of Chicago Mercantile Exchange Mr. Melamed informs that in China, so far, the potential markets were kept isolated and limited with the country’s internal exchange affair. The 2015 annual conference of the BFA, namely the BOAO forum for Asia that took place in the province of Hainan, he further adds that the future prospects of Chinese market was lacking the foreign influence and participation which is a trademark of international markets. However, observing the potential of the near future exchange patterns with the Chinese market, Mr. Melamed sees a successful scheme for a global market. The Shanghai International Energy Exchange is situated at the city of Shangai in its “Free Trade Zone” area. The company informs that before it starts to trade it will abide by the decisions of the regulatory body called China Securities Regulatory Commission or C.S.R.C. in short. In fact, sources from C.S.R.C. have informed that the mercantile exchanges will be open to trade in future investments of crude oil. As per Mr. Melamed, there is a cycle of development even in the market development which can be gauged by its patterns. Till date, he says, Chinese markets were closed within themselves, even after passing through the preliminary stages of developments. Therefore, the opening up to the global market was to come inevitable sooner or later as “the next stage of development". About twenty years ago, China had taken its first steps towards its futures exchanges resulting in a sudden boom in the economy generated by the trading revenues. Currently, forty different Chinese futures commodities and two such financial fronts are being traded in the future markets. This line of futures trade investments covers various fields including chemical, agricultural, metal and energy sectors. In fact, the annual rate of growth measured showed an increase by more than fifty percent in the collective “futures transactions” in the last five years. Nevertheless, the Chinese market has had its own reasons for closing itself from the influx of global market, which is justified in its own way. The reason behind this justification is a pointer towards the developmental stages in the years of 1990’s which proves chaotic. It is that fear resulting from such a chaos kept the country’s market behind closed doors, lest it falls at the risks of immature financial operation translating into a “lack of supervision”. However, China being one of the major consumer, commodity trader and producer, has lost quite a lot of “pricing power” as it shunned the influence of global shareholders. Even though China is second biggest consumer and importer of crude oil and also the fourth producer country of crude oil, the country only contributed to seven percent of the crude oil price in the global market. The director Yang Maijun of INE said the company will follow the “Renminbi-denominated pricing” which would be “open to overseas investors” as well. Moreover, there are future plans of trading in precious metal, natural rubber, and non-ferrous metals, if the crude oil model turns out to be successful. References: