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Futures Sector Regains Strength
China's ill-fated futures industry is to bounce back in the new millennium, in a move to diversify and improve China's fledging capital market system, said Zhou Xiaochuan, chairman of the China Securities Regulatory Commission (CSRC).
"After seven years of harsh adjustment, it is now the right time to rebuild the market and the financial authorities are set to give the industry much more room to develop a well-structured capital market," said Zhou, at the launch ceremony of the China Futures Association (CFA), a non-governmental organization that aims to promote self-disciplinary and rational development of the sector in China.
The association is also scheduled to work out regulatory rules, supervise the enforcement of the rules and strengthen communication and training in the sector, said Tian Yuan, the newly elected president of CFA.
Established in 1990, China's 10-year-old futures industry has experienced a very rocky road over the past decade. It ran in line with the securities market in the early 1990s in an attempt to help the country strengthen its reform from a traditional planned economy into a market-oriented one.
But the growth of the industry slowed in the early 1990s, due to an inexperienced and inefficient supervision system, complex and overheated market expansion, redundant products and a huge number of speculators.
The situation peaked before the central authorities had a chance to intervene and consequently they took a number of stern measures to re-order the market at the end of 1993. At that point over 40 futures exchanges and more than 300 futures brokerage firms had been established in the country.
But China's futures soon fell into the doldrums. As the adjustment continued into the mid 1990's the 35 products in the market dropped to 12 and the exchanges were reduced to three, in Dalian, Shanghai and Zhengzhou.
The total transaction volume of China's futures industry stood at 1,600 billion yuan (US$193.23 billion) in 2000, much less than its peak of 5,000 billion yuan (US$603.86 billion) in 1993.
But Zhou said the situation has turned for the better after the years of adjustment.
The country has developed four regulatory rules to help safeguard the smooth running of the industry and investors have matured and take a more practical approach to the market and risks, Zhou said.
Zhou was echoed by Dong Fureng, a renowned economist at Peking University, who claims that China needs to upgrade its rules into a futures investment law, which can govern the smooth development of the industry.
Dong, also the vice-president of the treasury committee under the Eighth National People's Congress, was a major contributor in the drafting of the law.
Speaking after the establishment of the CFA, Dong told China Daily that the drafting of the law had been close to completion but was called off due to the adjustments.
He said the government could work out a new law which caters to the latest developments in the market and to the needs of the industry in less than one year.
"I believe the working of the law could be finished in 2001 if we spend the necessary time and effort on it," said Dong, billed as a heavyweight supporter for the development of the futures industry in China. (China Daily)
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