China's bond futures launch 'a very good decision'

HANGZHOU - China's upcoming launch of treasury bond futures will provide a tool for managing interest rate risks, and it is a very good decision, the globally-recognized founder of financial futures said Sunday.

"In the long run, it will help the Chinese financial market become more liquid and more efficient," Leo Melamed, chairman emeritus of the Chicago Mercantile Exchange (CME), told Xinhua on the sidelines of the 5th China International Assets Management Conference, which closed on Sunday.

The China Securities Regulatory Commission (CSRC) announced Friday that China will resume the issuance of treasury bond futures after 18 years of suspension. The trading is expected to start in about two months.

The bond futures mark the second product in China's financial futures portfolio, following index futures. The move to resume treasury bonds came amid China's deepening of market-oriented interest rate reforms, which have generated strong demand for hedging interest rate risks.

Melamed applauded the bond futures and said China's economic agenda should continue to evolve.

"China's corporations and its consumers have reached a stage where global risk management tools are essential as they seek higher growth on the world stage," said Melamed.

Therefore, it is imperative that China continue to develop financial derivatives and create greater liquidity in the underlying cash markets, he said.

Melamed said China's central bank is correct to keep credit expansion at an appropriate scale.

He said more risk management tools, such as futures and options, will integrate with the cash market to allow every segment of the marketplace to function together more efficiently.