Economic Observer Online
September 6, 2013
By Chao Xinrui (陈慧晶)
Translated by Zhu Na
Original Article: [Chinese]

Bond futures trading returned to China today after an 18 year hiatus with the China Financial Futures Exchange (CFFE) handling the first transactions.

In order to promote the issuance of Chinese treasury bonds and the development of the country's financial market, the Shanghai Stock Exchange launched China's first bond futures market in 1992.

However, due to a lack of regulatory oversight and other systemic problems, a huge trading scandal emerged and the China Securities Regulatory Commission (CSRC) halted trading in May 1995.

After a long hiatus, the China Financial Futures Exchange began simulated trading of government bond futures in February 2012 and the State Council approved the plan to once again allow bond futures to be traded in July this year.

"The launch of bond futures can provide a hedging tool for foreign investors, including banks, thus it benefits the promotion of the internationalization of the RMB," noted Xiao Gang (肖钢), Chairman of the CSRC, at the launch of the new bond futures market earlier today.

A number of financial institutions told the Economic Observer that securities companies and futures companies had already developed a group of customers interested in becoming involved in bond futures trading.

Tao Jinfeng (陶金峰), futures research director from Guotai Junan Securities, predicted that the bond futures market could help lift financial reserves by tens of billions of yuan before the end of the year.

Financial experts quoted in today's Beijing News said that the bond futures will help deepen financial reform in China. Many commentators also noted that the market environment is now more mature, that the regulatory bodies and mechanisms have improved and that the system is more sound.

Market specialists pointed out that the return of bond futures will not have much of an impact on the risks involved in investing in either the stock market or the bond market. It's unlikely that funds will be moved from stocks to bonds and thus the normal operation of the stock market is unlikely to be affected.

"The funds in the two markets have different risk preference and attributes，a competitive relationship does not exist," said Jiang Mingde (江明德), vice president of Sinolink Futures.

Links and Sources
Beijing News: 国债期货时隔18年重启
Economic Observer Online: Mock Trading of Bond Futures to Begin Monday
CFFEX: Official Site