Beijing will relax restrictions on state-owned enterprises’ (SOE) commodity derivative trading activities, allowing more of them to trade futures, swaps and options overseas, according to market sources.

Chinese SOEs are under control of the State-owned Assets Supervision and Administration Commission (SASAC), which reports to the State Council.

SASAC manages 112 SOEs in total, and in the past only 31 of them were allowed to take part in overseas commodity derivative trading.

For those SOEs without permission, any derivative trading activities required approval from SASAC beforehand. In the future, companies may be able to make these decisions themselves, according to market sources.

One futures department director at a state-owned firm confirmed to Metal Bulletin that they had received the notice days earlier, although he added that trading activity would still need to be reported to SASAC afterwards.

The new regulation is likely to mean that China will exert greater influence on metals, crude oil, as well as agricultural derivatives trading overseas, sources said.

The Chinese government introduced regulations tightening up SOE involvement in derivative markets in 2009 and 2011, in response to big losses which had occurred earlier.

China Aviation Oil lost $550 million in derivative markets trading in Singapore in 2004, and in Hong Kong, CITIC Pacific lost HKD14 billion.

China Eastern, Air China and shipping giant COSCO also all reported huge losses in derivative markets trading.

Li Wei, deputy director of SASAC, in late 2009 said 68 SOEs’ derivate business losses reached 11.4 billion yuan as of October 2008.

Kiki Kang
Wechat: KikiKang_MB