China's potential as a powerhouse in financial markets has been discussed for many years. Recent developments, including more access to China’s markets for foreign investors and the much-anticipated launch of the country’s domestic crude oil contract, are starting to change potential into reality in 2018. A panel discussion at the 43rd Annual International Futures Industry Conference took a look at what lies ahead for the country that stands on the precipice of big changes that are likely to reverberate around the world.
The panel was opened with a keynote introduction by Wang Mingwei, Chairman of the China Futures Association. Chairman Wang spoke briefly about the opportunities of the futures industry in China (the CFA was founded in 2000 and currently has 394 members). Wang highlighted that while the Chinese market is was only established in 1998, it has seen rapid growth. With “external pressure mixed with internal drive” accounting for 3.07 billion contracts, which accounts for 27% of the world’s total contracts, Wang foresees China to continue to grow at a quick rate.
Wang, who formerly worked at the China Securities Regulatory Commission (CSRC), the main regulator of the securities industry in China, projected four main topics for the CFA going forward:
- Get listed futures to meet market demand.
- Improve the capability of financial services at the intermediary level.
- China is a marketplace in transition (opening up).
- To build a second regulatory mechanism.
Chairman Wang said he expects China to learn greatly from overseas counterparts as it continues to grow and open to international customers.
The panelists from CME Group, Optiver China, G.H. Financials, and Hong Kong Exchanges and Clearing, discussed the opening of the Shanghai International Energy Exchange (INE) in Shanghai, China, on March 26, 2018. “This will be a key milestone in the opening up of China,” said Kevin Rideout of Hong Kong Exchanges and Clearing.
G.H. Financials’ Mark Phelps, said “it finally feels like the moment has arrived as we see this as positive for the industry.” The panelists agreed that the INE will be slow and measured as it grows over time, making the point that they do not foresee this being a Big Bang moment.
All things being equal, if these markets look and feel like the CME and ICE markets then China will have a successful exchange on the world stage.
Optiver China’s General Manager Charles Lui noted that patience is the key to operating in China, saying “[business] won’t see a 180-degree turn overnight.”
Panelists spoke to the tangible concern over what the PRC government will or will not do in regards to these new markets. Potential customers to these markets will be slow and steady as they gather data on how the government oversight will play out.
When it came time for predictions, the panelists all agreed that the INE will be successful in the year ahead.