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China woos foreign traders as crude futures planned for year-end

Thursday, May 28, 2015 - 13:29
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A worker walks down the stairs of an oil tank at a refinery in Wuhan, Hubei province. The Shanghai Futures Exchange is pledging a "fully international" platform as it reiterates plans to start a new crude futures contract at the end of this year.

[SHANGHAI] The Shanghai Futures Exchange is pledging a "fully international" platform as it reiterates plans to start a new crude futures contract at the end of this year.

Participation will be open to all foreign investors and the yuan will be fully convertible under the contract, Song Anping, the exchange's chairman, said at its annual conference in Shanghai on Thursday. Preparations are going "smoothly" and government agencies including the China Securities Regulatory Commission will release details on trading rules, he said.

China, which last month overtook the US as the world's biggest crude importer, wants to create an Asian benchmark contract that could offer it more influence in determining prices. Plans for oil futures trading go back more than two decades, with the government introducing a domestic crude contract in 1993 and stopping a year later amid an overhaul of its energy industry.

"A crude futures contract in China will be important to perfect the global oil-pricing system as so far, there is no authoritative benchmark in Asia," Mr Song said. "Some breakthrough is needed in the nation's foreign-exchange system to attract overseas participation."

The Shanghai International Energy Exchange, a unit of SHFE that will oversee crude futures trading, will allow foreign investors to transact through agents that have net capital of at least 30 million yuan (US$4.8 million) or the equivalent in foreign currency, according to draft rules published on its website in March.

Foreign entities that don't trade through agents should have a minimum of 10 million yuan of net capital or the equivalent, it said.

China has been buying more oil to fill its stockpiles as it sought to take advantage of a global price slump that started last year. Crude imports averaged 7.4 million barrels a day in April, compared with about 7.3 million a day for the U.S.

Overseas purchases as a share of its consumption will surpass 60 percent this year for the first time, up from 59.5 per cent in 2014, according to China National Petroleum Corp.

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