The Shanghai Futures Exchange will join hands with the Hong Kong
Exchanges and Clearing Ltd. (HKEx) to build the first crude oil
derivatives market in the two cities.
The two sides will set up a unilateral business model on crude oil
futures to serve both domestic and overseas investors, said
Frederick Grede, chief operating officer of the HKEx.
Representatives will be designated by the two exchanges to set up a
joint working group to study the best form of cooperation and the
potential market in the two cities, said Hu Zheng, deputy general
manager of the SFE.
A
memorandum of understanding (MOU) was signed by representatives of
the two sides recently. The cooperation plan of the two exchanges
will be submitted later to the China
Securities Regulatory Commission for approval.
"Anyway, we want to introduce crude oil futures as soon as possible
to transfer and manage price risks," Hu said.
China produces 160 million tons of oil annually, falling far short
of satisfying domestic demand. An oil importer since 1993, and
Asia's largest oil consumer, China imports 70 million tons of oil a
year. China's oil imports in 2002 accounted for 30 percent of its
total consumption.
Recent national statistics show that, by 2005, the gap between oil
supply and demand in China will reach 100 million tons.
In
accordance with its World Trade Organization (WTO) commitments,
China will open its oil retail market to foreign investors three
years from its date of entry into the WTO and its wholesale market
five years from the date of entry.
Li
Hui, assistant to the chief supervisor of SFX's Development and
Research Center, said the crude oil futures will be "vital to the
future economic development of the Chinese mainland and the rest of
Asia".
China opened oil futures exchanges in 1993 in Beijing and Shanghai,
but closed them down two years later during an overhaul of the
industry.
(Xinhua News Agency April 16, 2003)