Last week was another hectic week as deadline upon deadline piled up. The highlight of the week for me was researching the history of Chinese financial markets. The research is in anticipation of the long awaited deregulation of Chinese commodity markets.
The history of China's commodity exchanges is fascinating. After deregulation in the early 1990s, the markets boomed. Within a few years China had over fifty commodities exchanges. Following the typical pattern of deregulation, there were a lot of problems at first. Over speculation and instability led to government intervention. After only a few years, the fifty national-level exchanges had been culled down to around a dozen. A few years after that, the markets went through another rectification, leaving only three surviving national-level commodities exchanges: Zhengzhou, Dalian, and Shanghai. In 2006 these three survivors cooperated with China's stock exchanges to open a new financial futures exchange.
The past ten years have seen steady growth among all three commodities exchanges. Dalian, in particular, has gained global notoriety for the volume of its sales in iron ore and soybean futures.
Although the Chinese government has expressed interest in allowing its domestic commodities exchanges to have more influence upon global commodities prices, it has been reluctant to allow foreign participation. That's where my current work comes in. In the last year Chinese authorities have made two major announcements. First, was the announced loosening of regulations on the existing commodities markets (however, no time table was given for when investors could expect that change). Second, is the opening of an oil futures exchange in Shanghai's Free Trade Zone (expected late this year).
It is exciting to be here as China continues to take more steps to liberalize its markets and further integrate with the global economy.