CSRC Approves Petroleum Products Futures Market
The China Securities Regulatory Commission has approved
the opening of a futures market for gas and petroleum
products in Shanghai later this year.
The
China Securities Regulatory Commission is the branch
of China's State Council, or cabinet, responsible for
regulating the securities and derivatives market. The
creation of a futures market for gasoline and petroleum
products would help in smoothing out price fluctuations
for these products in China, and the development of products
for the China market.
Demand for gasoline has gone up precipitously in China
as sales for private automobiles have increased, making
China the world's second largest importer of oil in 2003,
only after the US. This growth has been far faster than
expected, as even in 2003, experts were predicting that
China would only overtake Japan later in the decade.
The main factor driving demand has been the private vehicle
market, and all makers have been experiencing rapid growth.
The Chinese government has been expanding efforts to secure
overseas oil sources, and the Chinese president, Hu Jintao,
has visited
Gabon to secure reliable supplies. Sinopec, one the
leading oil importers, has partnered
with China Shipping to insure that Chinese carriers
have sufficient shipping capacity to carry oil to Chinese
refineries. Demand for refinery capacity has also gone
up, and Sinochem recently purchased a Korean
refinery.
The decision to start a futures market is not new. Previously
China allowed commodities futures markets to operate in
the eighties and early nineties. However, many amateur
investors lost their savings, and the government reacted
by shutting down the futures exchanges.
Shanghai had a petroleum futures market in 1993, which
quickly became the third largest in the world following
London and New York. It faded in 1995 when the Chinese
government stepped in to set pricing.
The decision to approve gas and petroleum futures before
other agricultural commodities came as a surprise. Most
observers think that is because China has only three large
state-owned enterprises in this field, and it was easier
to get a decision made.
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