State-owned enterprises (SOEs) can now make use of financial
derivatives offered by the newly established China Financial
Futures Exchange to preserve state assets and dodge market risks, a
senior official told Xinhua.
"It wouldn't be a problem if SOEs conducted hedge trading at the
exchange," said Shao Ning, vice minister of the State-owned Assets
Supervision and Administration Commission.
This indicates a loosening of restrictions by the Chinese
government to give large and medium-sized SOEs the chance to
participate in futures trading, said experts. Regulations on
investments in financial derivatives were held off previously
because speculative trading was regarded as "special and complex".
Air China, the only Chinese airlines that made profits in the first
half of the year, might have facilitated the change.
According to its mid-year report, the company earned 102 million
yuan, or 69 percent of its total net profit, by hedging aviation
fuel costs.
Wang Zhen, president of the Management of Business
Administration Institute, China Petroleum University, said that
China should not be conservative about futures. "The key is to keep
the internal risks under control," he said.
China Financial Futures Exchange, the country's fourth futures
exchange focusing on financial derivatives trade, was inaugurated
on September 8 in Shanghai and is expected to start trading in
mainland stock index futures.
(Xinhua News Agency October 8, 2006)