China's futures industry has always had a dream: to enhance the international pricing power. Now, this dream has gradually become reality. The landmark event is that the price of TSR 20 futures in Shanghai International Energy Exchange is set for the industry's international trade.
At the beginning of this year, Baosteel Co., Ltd. and Vale, the world's largest iron ore supplier, completed the RMB issuing and cross-border settlement of some imported iron ore under the long-term agreement. This is settled and paid in RMB, but it is still denominated in US dollars. Experts in the industry said that nowadays, in the international trade, the price of TSR 20 futures that is priced in RMB is a major breakthrough and the first time for China’s futures market. At present, the international trade of commodities has formed a pricing model of "future prices + premiums and discounts". In the future, as the market becomes more internationalized, open and transparent "Chinese price" will be increasingly used in global international trade, then China's pricing power will be established.
The price of "Chinese Rubber" bloom in the international market
On October 29th, the representative companies from domestic and abroad in the natural rubber industry chain: Taihua from Thailand, Lianrun from Thailand, Sailun Tire, Senkylin Tire, Yongan Capital and Zheqi Industry, signed the agreement of pricing of TSR 20 in Guangzhou. the futures price of TSR 20 at Shanghai International Energy Exchange will be used as the pricing benchmark in the international and domestic procurement.
"The original intention of the futures market is to allow the prices found in the futures market to achieve pricing at the spot level."Fenghai Wang, general manager of Shanghai Futures Exchange, said that as a domestic specific futures product opened to the world, it is the first time that the price of TSR20 is used in the international trade and domestic trade. This is a milestone that the global natural rubber industry chain uses "Chinese price" as the pricing benchmark, and it is also a landmark achievement of the internationalization of China’s futures market.
Few days ago, Xinghai Fang, vice chairman of China Securities Regulatory Commission, said that China’s futures market has the ability to become an important global pricing center based on 30 years of development. Today, the price of TSR20 futures is priced for international trade, marking a breakthrough in the pricing power of China’s futures market in the global rubber industry.
Since the listing of TSR20 futures on August 12th, 2019, after a year of development, the institutions holdings accounted for 85%, and the institutions trading volume was about 70%, which is the highest among the all products in the futures market. The participation ratio of foreign investors is about 20%, and the market size has surpassed that of similar products on the world futures exchanges.
Ming Chen, chairman of Guangdong Guangken Rubber Group Co., Ltd., told reporters that in the international trade, the industry used Singapore's relevant prices for pricing. This time, Taihua Gum and downstream tire companies signed the agreement of pricing of TSR 20, he realized the important role played by TSR20 futures. "China is building an international pricing center for natural rubber.
The relevant person in charge of Thailand Lianrun Rubber Co., Ltd. told reporters that China's TSR20 futures displayed the price of "Chinese rubber" in the international market, which will become the pricing benchmark for natural rubber international trade.
Fenghai Wang said that Shanghai Futures Exchange will discuss the launch of international settlements to further enhance the internationalization of TSR20 futures and build a global natural rubber pricing center.
The combination of "bringing in" and "going out"
The internationalization of China's futures market combines 'bringing in' and 'going out'." Yuyue Hu, director of the Securities and Futures Institute of Beijing Technology and Business University, believes that the futures as a "small industry" meets a "big market." The internationalization of China’s futures market is a great breakthrough. Generally speaking, from the current trend of declining globalization, it has opened a window of time for the establishment of a regional pricing center and also provided a good opportunity for RMB to participate in the pricing of commodities.
At present, a number of competitive and influential companies have emerged in China. Their production and operation are deeply integrated with the global industrial chain and supply chain, and they will continue to improve their ability in the process of mutual promotion in the international and domestic. The futures industry must accelerate to adapt to the needs of a high-level open economic system, prepare for the combination of local cultivation and international expansion, and provide entity enterprises with a more complete chain, higher quality, and more diversified risk management services.
In terms of "bringing in", there are five futures products that are open to foreign investors in China; the foreign equity ratio restrictions of securities and futures institutions are fully liberalized ahead of schedule. The convenience of foreign investment in China's futures market has continued to improve as well as the level of participation has continued to increased. Xinghai Fang said that as long as it is a conditional futures product, it must promote internationalization and exert its international influence commensurate with China's international status. "At the same time, we will strengthen supervision and create a stable and vibrant capital market in an open environment. We are confident in this," Xinghai Fang said.