The China Securities Regulatory Commission (CSRC) announced Tuesday that it had approved the application of Dalian Commodity Exchange to launch corn futures. The CSRC did not provide a date for the start of trading.

This is the first food futures product approved by the Chinese authorities since 1998, when an industry cleanup led to the cancellation of many futures products.

A spokesman with the Dalian Commodity Exchange said Tuesday that the exchange had prepared contracts, trading rules and technology and could guarantee stable operation of the system. Trading will begin "as soon as possible," according to the spokesman. The exchange has been preparing for corn futures for more than five years.

Corn output in China averages 120 million tons annually, accounting for about one-third of total grain output.

China is the world's second biggest corn consumer. As a major raw material for feed and industrial processing, corn has also become a lifeline for more than 500 million peasants in China, according to a researcher with the Dalian Commodity Exchange.

Corn supply and demand and price movements have a major impact on the agriculture sector and the national economy.

The trade of corn futures in China will enhance the nation's position in determining corn prices in international markets. The price-discovering function of the market will also help promote sound economic development and the overall reform of the foodstuff distribution system in China.

Corn futures trends should assist farmers in adjusting their planting plans according to market supply and demand, and to hedge price fluctuation risks.

Corn futures are the third new futures product approved by the CSRC this year, following the approval of fuel oil futures in the Shanghai Futures Exchange in April and cotton futures in the Zhengzhou Commodity Exchange in June.

Cotton futures are already being traded in Zhengzhou, and fuel oil futures trading is scheduled to start next week in Shanghai.

Analysts say that the fact that each of the three futures exchanges is able to launch one new product this year is a breakthrough in the futures industry.

In the late 1990s, a slew of price-rigging scandals caused authorities to clamp down on the futures industry, closing down many exchanges and trading products. By the end of the cleanup, only about a dozen futures products survived in the three exchanges.

Since last year the industry has been recovering, with a record turnover of 10.8 trillion yuan (US$1.3 trillion) for 2003 and a staggering 8.5 trillion yuan (US$1.0 trillion) turnover in the first half of this year.

(China Daily August 18, 2004)