China’s plans for a crude-oil futures platform accessible to overseas investors are still being pursued, it has emerged, rebuffing earlier reports that the scheme had been put on hold.
According to a story in state-run finance journal the Shanghai Securities Times – re-reported by Reuters – China Securities Regulatory Commission (CSRC) leader Liu Shiyu has reaffirmed his agency’s commitment to the platform.
He is also determined to create the conditions for more stable commodities futures markets in China.
While no timings for the lifting of restrictions on foreign participants were revealed in the meeting, the CSRC hopes that the new crude contract will encourage a return to China’s commodities scene of hedge funds and institutional investors.
The regulator is also eager for the platform to spur a liquidity boost in China’s financial markets.
The news forms but the latest chapter of the CSRC’s long struggle to establish the new trading platform. In March 2016, the launch was postponed to the end of that year amid a government review of the contract’s intended managing entity, the Shanghai International Energy Exchange (INE).
At that point, according to S&P Global-owned market intelligence firm Platts, the CSRC was “reluctant to see unexpected risks pass through to INE’s parent company”, the Shanghai Futures Exchange.
As recently as January, Reuters reported that the contract had been shelved, pending a complete rethink.
Speaking to the news agency, JTD Energy director John Driscoll noted that risk was once again an obstacle. From what he had gleaned, “unanswered questions” during the planning stages had swirled around “how reliable a central government that directly or indirectly controls everything from import and export licences to pipelines or storage facilities would be as a price benchmark”.
However, that government desire for control shows no sign of abating: as a subtext to the ebb and flow of discussions around the crude futures platform, reports have emerged that Chinese state-run oil and chemicals giant Sinochem is in talks to partner with commodities trader Noble Group as a strategic investor.
It would be the fourth time in five years that a state-owned enterprise (SOE) had bought a stake in a global commodities trader.
Commenting on the talks to Bloomberg, North Square Blue Oak analyst Tian Miao pointed out that the proposed deal fits with China’s policy to internationalise SOEs, “especially in areas that have power to set or influence global commodity prices”.
One measure to achieve that, he added, “is to seek control of supply chains and trading platforms”.