China opens more agricultural futures to international investors

Many new futures products are now open to international traders, according to announcements late Friday evening from the China Securities Regulatory Commission (CSRC). 

On the Dalian Commodity Exchange, soybean meal, soybean oil, and domestic and imported soybean futures can now all be accessed under the Qualified Foreign Institutional Investor program.  

On the Zhengzhou Commodity Exchange, rapeseed oil futures were also opened to foreign traders.  

A range of other non-agricultural commodities across the Dalian, Zhengzhou, and Shanghai exchanges was also opened to foreign traders.  

Notably, some major commodities were not opened to outside investors. Corn and hogs remain only available to local traders and companies. 

Corn and hogs were likely excluded from this opening as they are more politically sensitive commodities to the government. Corn, wheat, and rice are considered staple grains that are important to food security. While China does have wheat and rice futures, they are relatively illiquid, not frequently used by commercial traders, and also were not opened to outside investors. 

The reasons for opening up these products to international traders are likely two-fold.  

First, China wants the country to be a pricing point for international commodities trading. It is one of the largest consumers of a range of commodities, but most futures products are priced elsewhere.  

Secondly, this could also help improve the development of the domestic markets. A similar opening to international investment has happened in other financial-related sectors including mutual funds, investment banking, insurance, and brokerage.