BEIJING May 14 (Xinhuanet)--At a time in which the next five years are forecast to be a golden period for the futures market in China, the country has to decide whether to open the sector to foreign business - allowing it to speculate on forward transactions, China Daily reported Tuesday.

More investors on the mainland are reportedly preparing for a heating up of the futures market and seeking to profit from it.

Chang Qing, deputy head of the China Futures Association (CFA), predicted five golden years ahead for the sector.

Presently only Chinese firms and individuals are entitled to do the business, but the central authorities will have to consider the whole issue soon as the China Securities Regulatory Commission (CSRC) and the CFA are drafting a five-year plan.

The two organizations are soliciting opinions and proposals to revamp existing rules and establish sound supervisory and legal systems.

Time and painstaking efforts are needed to work out concrete measures and make rules adaptable to free trade, although the opening of the sector is inevitable, according to an insider, who declined to be identified.

A few years would be needed for the mainland to actually open its fledgling market, he said.

Barriers include prohibitive regulations, the inconvertibility of renminbi and the small scale of the futures market.

Another urgent question that has to be addressed is futures transactions of major commodities such as oil and approval for a stock index, the insider said.

Calls are rising on the mainland to urge the central government to let the futures sector fully develop to help stabilize spot markets and hedge trade risks.

China's economy and commodities market are facing higher risks as they increasingly integrate with the global systems that are often volatile.

Futures transactions had been banned in China until the early 1990s. A few market places were set up for a limited number of minor commodities.

Forward exchange of major commodities or those described as concerning the economy's security are still banned or suspended.

Chu Juehai, director of the research and development centre of the Shanghai Futures Exchange, seemed optimistic about the market opening.

In an interview with China Daily, Chu said he believed the question of allowing foreign firms and individuals to join in futures investing can be solved as China now is a member of the World Trade Organization.

Chu argued the Shanghai Futures Exchange, barometer of China's forward business sector, cannot be an international one unless qualified foreign firms and individuals are allowed in.

(Xinhuanet 2002-05-14 12:35:59)