Treasury futures trading to resume in China after 18 years

Government wants companies to cut reliance on bank loans.

The resumption of trading of government bond futures will provide investors with a hedging tool and was approved by the State Council, China’s highest-level government body. Futures are a type of derivative used to hedge risk or for speculation.

The China Securities Regulatory Commission has approved the China Financial Futures Exchange to start the trading. Preparation will take some two months, CSRC said.

The moves follow government efforts to encourage companies reduce their reliance on bank loans and spread their credit risk by selling debt. China is opening its US$3.7 trillion bond market to foreign investors through its Qualified Foreign Institutional Investor and Renminbi Qualified Foreign Institutional Investor programs. Trading could start as early as September.

Sales of government notes rose to US$261 billion in 2012 from US$8.6 billion in 1997, according to Chinabond, the nation’s leading debt clearing house.