China restricts trading in overseas futures to domestic lenders such as Bank of China and Agricultural Bank of China, while 26 Chinese companies are approved to trade in overseas commodities futures markets, said Steve Ng, ABN Amro Holding NV's Asia head of global futures.
ABN Amro, the biggest Dutch bank, plans to apply to set up a futures venture with Beijing-based Galaxy Securities Co to tap growing demand in China.
"China has the potential to be the biggest futures market in Asia within the next five years," Ng said. ABN Amro's revenue from China futures operations has doubled in the past two years, he said, declining to give figures.
China already allows trading in 11 types of commodity futures, including copper, cotton and soybeans. As of June, the nation had about 180 futures brokerages. US exchanges trade futures contracts on more than 130 products.
China's central bank last month said it will let more than 130 domestic and foreign banks trade yuan forward contracts and swaps on behalf of clients.
Forwards are agreements in which assets are bought and sold at current prices for delivery at a later specified time and date. They will allow local companies and investors to protect themselves from swings in the yuan and other currencies.
The Shanghai stock exchange is studying plans to introduce exchange-traded funds, or ETFs, based on the Asia Bond Fund, ETF warrants and stock-index futures, Geng Liang, head of the exchange, said at the conference.
The Shenzhen stock exchange is running trials of stock-index futures and is studying plans for stock options, said Zhang Yujun, the exchange's chief executive.
Use of derivatives would have enabled China to earn higher returns on its foreign-exchange reserves, which stood at US$711 billion at the end of June, NPC Vice Chairman Cheng said. The government made US$40 billion on the reserves last year, mainly through bond interest and appreciation of the euro, he said.
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