China to promote wealth management investment in commodities

[BEIJING] China's securities regulator said it will encourage wealth management firms to invest in commodity futures in a bid to promote its domestic derivatives industry and raise the amount of commodities in the nation's assets under management.

The regulator will loosen restrictions that limit how commercial banks, insurance companies and pension funds invest in commodity futures, Fang Xinghai, vice chairman of the China Securities Regulatory Commission (CSRC), said in a speech on Saturday that was released on the CSRC's website.

Mr Fang, who was speaking at a financial forum in Qingdao, did not give further details on the proposal.

His comments underscore growing government backing for derivatives markets for commodities ranging from copper to oil to fruits in a bid to support the real economy, as Beijing ramps up regulation of equities markets and tries to tame its red-hot property market.

However, any major push by wealth managers into the futures sector could also increase volatility in prices of raw materials, like iron ore, which have been whipsawed by speculative and institutional investors in recent years.

"Commodities are indispensable resources for the industrial economy," Mr Fang said.

While securities and futures institutions had developed derivatives-based products for commodities, the overall size was still small, he said.

Exchanges must continue to develop futures and options contracts to add to the 54 existing agricultural, metals, energy and financial products, while regulators will accelerate efforts to open up commodity markets to foreign investors, he said.

To illustrate the vast size of China's personal wealth, Mr Fang referred to a report by Boston Consulting Group, which showed assets held by individuals reached US$176 billion last year, behind only the United States.

About 40 per cent of that is in bank savings and wealth management, another 40 per cent is in real estate, 10 percent in the stock market and another 10 per cent in trusts and other products, the report showed.

REUTERS