By Wang Lan (China Daily)
Updated: 2008-01-14 11:38

　　

Developing Shanghai's futures market is essential for turning the city into an international financial center, experts say.

The past year has seen the expansion of the Shanghai Futures Exchange (SHFE), the biggest of China's three commodity exchanges, while the China Financial Futures Exchange (CFFEX) is in final preparations to launch index futures trading.

With the debut of gold contracts last Wednesday, the SHFE is trading a total of 6 commodity futures products, including contracts of copper, aluminum, zinc, gold, natural rubber and fuel oil.

To diversify its product range, the bourse plans to launch new contracts on nickel, silver and steel futures this year.

Analysts predict the Shanghai futures market will pick up speed in years to come on the back of the booming capital market and national economic growth.

Compared with the other two exchanges, the Shanghai bourse is playing a particularly crucial role in the development of the nation's futures market.

Statistics show that in 2007, the total turnover of all futures contracts on the SHFE amounted to 21.76 trillion yuan ($2.99 trillion), up 72 percent from the year before. It accounted for no less than 70 percent of the combined volume of futures transactions on all the nation's commodity exchanges.

Industrial experts and analysts say that as the futures market has expanded and efficiency has been improved in recent years, Shanghai has emerged as an international center for setting commodity market prices.

"Shanghai's commodity futures market is stepping up efforts to expand the range of products and deepen the pool of liquidity to suit the increasing needs of the nation's rapidly growing economy," says Gong Yangshu, a professor at Shanghai University of Finance and Economy.

All futures contracts have been traded actively on the SHFE in the past year. Zinc is a case in point. Since it started trading in April, zinc contracts have attracted a large number of traders, with total turnover amounting to 2.29 trillion yuan in the following eight months. Investors also showed increasing enthusiasm for copper futures in 2007. The turnover of copper contracts on the SHFE totaled 9.35 trillion yuan in 2007, up 189 percent from the year before.

Industrial analysts and experts say China's position as the world's major commodity producer and consumer has helped Shanghai become a pricing center. During the past several years of development, the SHFE has become an important pricing center for nonferrous metals. According to SHFE statistics, the coefficient index, an indicator reflecting the correlation between London Metals Exchange copper prices and those in Shanghai, has increased from less than 10 percent to 40 percent.

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