China plans Shanghai derivatives exchange

The Chinese government has approved a project by five Chinese stock exchanges to set up the country's first financial derivatives exchange in Shanghai.

The exchange will be a joint venture between the Shanghai and Shenzhen stock exchanges, the Shanghai futures exchange and the Dalian and Zhengzhou commodity exchanges, each of which will own 20%.

According to reports in the Chinese newspaper Economic Observer, Fan Fuchun, currently vice-chairman of the China Securities Regulatory Commission, will head the exchange.

Shanghai, Dalian and Zhengzhou already permit trading of commodity futures, but China lacks an exchange for trading in financial futures. The new exchange will initially list stock index futures, followed by interest rate and currency exchange futures.

Financial derivatives trading was re-legalised in October 2005 after a 10-year ban prompted by a 1995 treasury bond future scandal, in which short-selling of bonds threatened to cause a financial crisis.