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China allows over 100 state-owned firms to assume commodity derivatives trading

Posted on : 16 Jun, 2015

 

China allows over 100 state-owned firms to assume commodity derivatives trading, creating opportunities for structured trade finance deals.

 

China is one of the world's biggest consumers of metals, energy and agricultural products. The country has recently more than tripled the number of central government owned firms that are allowed to trade commodities derivatives overseas without regulator's approval.

 

The move is expected to give China an extra edge in global markets for metals, energy and agricultural products. The development of China's involvement in derivatives and international financial markets also has ramifications for trade financiers. Derivatives are an important risk management tool which allow traders to hedge and therefore reduce price risk, which should have a knock-on effect in terms of cost of financing and the allocation of regulatory risk capital within banks lending to Chinese companies.

 

The number of companies now allowed to trade derivatives is now said to be over 100 - making it the biggest expansion in nearly a decade. These companies are likely to be targeted by financiers as the ones engaging in new international operations. As such, they may represent opportunities in terms of structured trade finance. This is particularly the case for the energy sector and users of oil products such as airlines and shipping companies. The resulting capital inflows and outflows will certainly attract the attention of financiers.

 

We'll be discussing the prospects for trade financiers and traders in the context of these new opportunities in China at Asia STCF (Structured Trade & Commodity Finance) on 30 June-1 July, 2015, in Singapore.

 

Contact Ms. Grace Oh at grace@cmtsp.com.sg or call +65 6346 9147 for more details.