China to Set No Capital Limit on Oil Futures for Foreigners

  • No quotas or size limits on foreign traders, regulator says
  • Yuan-denominated crude contract expected to start 2016

China won’t impose capital limits on its planned crude futures contract for foreign traders, according to the country’s currency regulator.

“Foreign investors won’t have any type of quota or size restrictions,” said Guo Song, an official with State Administration of Foreign Exchange, according to a transcript of a briefing on Thursday.

China is offering the yuan-denominated crude contract in Shanghai, which will be the nation’s first commodity futures available to foreign investors, to gain more clout over oil pricing and promote greater use of its currency. The move also highlights efforts by the country to loosen capital-account controls, including deregulation to facilitate cross-border capital flows and enabling companies to directly obtain cheaper offshore funds.

“China’s 13th five-year plan has said that we’ll gradually realize capital convertibility,” Guo said, referring to the country’s top policy-planning document, which will be publicly released early in 2016. “We’ve made one step further this year by not planning to set any quota for foreign investors in oil futures.”

Scheduled to start by the end of this year, the crude future listing on Shanghai International Energy Exchange Ltd. is delayed until 2016, Lu Feng, an official with the bourse, said last month. The exchange must finalize rules and conduct mock trading, and still needs approval from the China Securities Regulatory Commission, he said.

Overseas participants can open foreign-exchange settlement accounts used solely for crude trading at designated banks, SAFE said in July.

— With assistance by Ran Li, and Jing Yang

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