China to Open Commodity Futures Market to Foreign Investors

Foreign investors will be allowed to transfer either foreign currency or yuan funds into China to trade in the country’s commodity futures markets, the foreign exchange regulator said on Friday.

The imminent opening of its booming commodity futures market is a major reform supporting Beijing’s efforts to increase its sway on global commodity pricing. China is the top global consumer of many raw materials.

The securities and futures watchdog announced in June that Beijing would allow foreign investors to trade in some commodities futures for the first time, and the forex regulator’s announcement on Friday made related foreign exchange regulations ready for foreigners to trade futures.

Foreign players, especially institutional investors, will also help develop the sector and usher in international practices, analysts have said.

At present, foreign companies have very limited access to China’s commodities markets. Companies are only allowed to trade via brokers after setting up a locally registered non-financial unit, which requires a hefty amount of registered capital.

As of Aug. 1, foreign commodity futures trading or brokerage firms can open special accounts in designated China-based banks, and funds transferred for such trading must not be used for other purposes, according to rules issued by the State Administration of Foreign Exchange (SAFE) on its website on Friday.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza