The Shanghai Futures Exchange (SHFE) unveiled 34 new regulatory proposals on Tuesday aimed at opening China’s futures market to foreign investors and brokers. This initiative forms part of a broader strategy to internationalize the Chinese yuan (RMB) and boost China’s influence in global commodity pricing.
The proposals span key areas such as gold and silver options trading, hedging strategies, and precious metals futures. The SHFE stressed its goal of achieving “full opening to foreign participants” in its market.
Tiger Shi, CEO of BANDS Financial, described the announcement as “a fundamental change in the Shanghai Exchange’s constitution,” highlighting that direct foreign access to SHFE products is now accelerating rapidly.
Key Changes Proposed
- Foreign brokers and investors will be allowed to trade directly on the SHFE without requiring local intermediaries.
- Margin payments could be accepted in foreign currencies, including the US dollar.
- These regulatory proposals will be open for public consultation until June 4.
Supporting China’s Broader Financial Globalization Strategy
This move aligns with an earlier April 21 announcement from the People’s Bank of China (PBoC) and three government agencies, which unveiled investments to support the Shanghai Gold Exchange’s (SGE) internationalization. This includes plans to establish international delivery warehouses aimed at positioning Shanghai as a rival to the London Metal Exchange (LME) in global gold pricing.
A report by Jinshi Data described the strategy as enhancing Shanghai’s role as a global financial center for resource allocation. It focuses on developing cross-border trading platforms, strengthening cooperation with foreign exchanges on pricing, and expanding the global use of RMB-based reference prices.
Shifting the Global Commodity Pricing Landscape
Despite China’s status as the world’s largest consumer of precious metals, most pricing currently depends on international benchmarks like those from the LME. Beijing seeks to alter this dynamic by establishing Shanghai futures contracts as global benchmarks—challenging Western dominance in metals markets that has lasted over 140 years.
Reuters previously noted that successful foreign participation on the SHFE could grant China’s contracts global benchmark status, lessening dependence on Western price signals.
Wang Fenghai, general manager of the SHFE, told state media that market internationalization is essential for strengthening China’s influence on metals pricing. He added that the exchange is actively working on cross-border delivery infrastructure, including setting up warehouses abroad to hold metals linked to its futures contracts.
