BEIJING, Dec. 31 (Xinhua) -- In the year of 2014, China's futures industry witnesses major improvements several aspects such as regulation making, transaction innovation, asset management reform, industrial reshuffle as well as headways made on acquiring more international influence. Chinese futures firms, which have been struggling on the edge of profit and loss, embraced a year of innovations and reforms, with top design for the industry gradually mapped out and futures firms extending their business scope.
-- Futures legislation accelerated
China has worked out the second draft of the futures law, Yin Zhongqing, head of the futures law drafting team, said at a seminar held on November 12 this year.
The drafting work kicked off on December 12, 2013, the day when the drafting team was set up. Yin is one of the vice chairmen of the committee of Commission of Finance and Economy under China's top legislature, the National People's Congress.
According to Yin, China's futures law will focus on five aspects. First, it will allow all financing institutions to apply for license to carry out futures businesses. Second, it will allow futures firms to expand business scope, including brokering, proprietary investment, futures counseling, futures asset management, etc. Third, it will stipulate strict rules on the procedure of opening or closing a futures firm. Fourth, it will strengthen requirements on code of conduct for futures firms. Fifth, it will enhance the supervision system on futures industry.
-- First Futures Innovation Conference held on Sept. 17, 2014
The long-awaited Futures Innovation Conference was held on September 17 this year, co-hosted by China Futures Exchange and major futures exchanges of the country.
The conference was taken as a milestone on the development road of Chinese futures industry, after which China's futures industry is expected to enter a new stage of innovative growth.
Jiang Yang, vice chairman of China Securities Regulatory Commission (CSRC), pledged at the conference to form multiple types of operations in the futures industry and strengthen support on futures firms.
Chinese futures industry started early but advanced slowly, compared to the securities industry.
According to pubic statistics, China had 329 futures firms in 1996, which reduced to 156 by the end of 2013, with total assets of some 256 billion yuan, annual revenues of 18 billion yuan and annual profits of 3.5 billion yuan. In the meantime, Chinese securities firms increased from 94 in 1996 to 115 by the end of 2013, which had assets totaling 2.08 trillion yuan, net assets totaling 753 billion yuan, annual revenues totaling 150 billion yuan and annual profits totaling 44 billion yuan.
-- Night sessions expanded to 23 futures products
China opened night trading on 17 futures products in 2014, including coke, palm oil, sugar, cotton, rapeseed meal, methanol, PTA, soybean meal, soybean oil, soybean #1, soybean #2, coking coal, iron ore, rebar steel, hot-rolled coil, natural rubber and asph.
In 2013, contracts of gold, silver, copper, aluminum, zinc and lead were first extended to night trading, which proved to have provided investors with more time to hedge risks.
So far, China has listed 46 products for trading on its futures bourses.
-- New round of M&As press ahead industrial reshuffle
China's futures industry started its first round of mergers and acquisitions in 2010 following the launch of stock index futures, which was characterized by securities brokers acquiring futures brokers.
From 2011 to 2013, futures companies stepped up M&As among themselves, which, as the second round, enhanced concentration of the futures industry.
In 2014, the futures industry embraced the third round of M&As, with trusts, banks, foreign funds and private equities stepping up entering futures business.
In February this year, CCB Trust Co., controlled by ChinaConstruction Bank, acquired a Shanghai-based Liangmao Futures. After that, CCB Trust became the fourth trust in China owning a futures firm and Liangmao Futures became the second futures broker with a bank background following BoC International Futures.
A bit later in February, UBS Securities acquired a 95.42-percent stake in Shanghai-based Pumin Futures, which became the fourth futures broker backed by foreign investment in China.
In May, Chaos Investment, a private equity, acquired a 97-percent stake in Guangdong-based futures broker Hoohy and renamed the latter as Chaos Ternary Futures. It was the first case of a PE buying futures broker in China.
In June, Minmetals Futures announced acquisition of Jingyi Futures. The two sides are complementary in terms of client types, registered capitals as well as sales channels.
In October, CITIC Futures disclosed it had applied to acquire CITIC Newedge Futures.
-- "One-to-many" business introduced in asset management
On December 4, China Futures Association issued a document illustrating administrative rules on asset management business of futures firms, which lowered threshold for futures firms to do asset management and allowed futures firms to serve more than one client under one account.
Under the rules, future firms with at least 100 million yuan of net capital and a latest rating of C and above are allowed to apply to do asset management, which means 110 futures firms in China are qualified.
So far, 37 futures firms have got the license, together managing assets worth about 10 billion yuan.
Apparently, the reform opened a new gate for futures firms to access weh management business. Yet market participants do not expect it to bring in much more profit for futures firms.
The asset management business has gone through more than 20 years of development and come to a stage of massive size, fierce competition and thin profitability, which is unlikely to change the profit scenario of futures firms, as a green-hand in this area, shortly, said Yao Guang, general manager with Galaxy Futures.
-- Crude oil futures to strengthen Chinese markets' international pricing power
On December 12 this year, China Securities Regulatory Commission (CSRC) nodded Shanghai Futures Exchange to conduct crude oil futures trading at Shanghai International Energy Exchange Corporation (INE).
After four years of preparations, the listing of crude oil futures finally came to a count-down in China. Analysts expect crude oil futures to be listed in the first half of 2015.
Crude oil will be the first futures product in China to allow international investment involved.
China is the fourth largest crude oil producer and the second largest crude oil consumer and importer in the world, relying on import for about 60 percent of its oil demand. Yet China accounted for about 7 percent in the global crude oil pricing and analysts expect the listing of crude oil contracts to lift China's say on the global oil market.
-- Futures market cushions commodities slumps, better serves real economy
Commodity futures prices slumped sharply in 2014 led by a plunge in global crude oil, out of almost any expectation made last year.
Shanghai base metals dropped during 2014 except for zinc seeing an uptrend. Shanghai lead price hit a four-year low this year after falling about 10 percent versus the beginning of this year.
Iron ore price, which almost slashed a half during 2014, led the ferrous metals lower across
This year Shanghai gold price roughly kept flat with that of last year, while Shanghai silver price hit a two-year low with a decline of 14.24 percent.
With well functioned futures market in China, the negative side of fluctuation of commodities prices has been effectively reduced, and the full market-oriented pricing became a good guide to the producers and consumers of various commodities goods.
(By Zhang Yuenan, zhangyuenan@xinhua.org)