COLUMN-China’s plan to boost commodity trading needs reality check – by Clyde Russell (Reuters U.S. – June 20, 2017)

The call by China’s securities regulator for the country’s wealth managers to invest in domestic commodity futures is both encouraging and somewhat bizarre.

The China Securities Regulatory Commission (CSRC) aims to promote the domestic derivatives industry by loosening regulations that restrict how commercial banks, insurance companies and pension funds invest in commodity futures, Fang Xinghai, the commission’s vice chairman, said on June 17.

Fang, who was speaking at a financial forum in Qingdao, didn’t give further details of the proposal, but it seems to fit into recent moves by the authorities in Beijing to promote commodity trading and become more of a player in global markets.

The positive news out of the CSRC’s announcement is that China seems to be getting serious about opening up its markets and encouraging a broader range of participation.

Several commodity contracts have taken off in recent years, such as iron ore on the Dalian Commodity Exchange (DCE). But these have often been criticised as more like legal casinos for day-trading retail investors rather than offering price discovery or viable hedging for market participants.

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