Although the stock index fund wasn't launched in the first half of this year as was previously anticipated, Wang Liangguang still decided to open an account in a futures trading company.

"I should practice before hitting the road," Wang said. "When stock index futures are launched, I will have some experience in them."

Wang is a veteran stock trader. After being laid off from a state-owned machine tools plant in 1997, Wang thought of seeking other ways to make money and began to trade stocks in 1999. He has earned some money from the stock market in recent years, though not much. The booming bull market has given Wang even more confidence, while the stock slump on June 4 and 5 this year has made him uneasy. "The only market we can rely on if there is turbulence in stocks is the futures market," Wang explained. Yet at this stage Wang doesn't know much about the brand new market, and is still learning how to navigate it.

Jin Zhengnan, consultant with the China International Futures Co. Ltd. (CIFC), said many people are opening accounts with his company and many have started commodity trading in the futures market in order to get familiar with the whole process.

Ever-growing market

Compared with the stock market, the Chinese futures market is developing in a steady manner. In 2006, the total trade volume in the futures market reached 21 trillion yuan, up 56.23 percent from the previous year.

China's first futures market was the Zhengzhou Commodity Trade Market, which first launched trade in commodities in 1990 and introduced futures trade mechanisms in 1993. "The rapid development shows the vitality and potential of the Chinese futures market," said Hu Yuyue, Director of the Securities and Futures Institute with the Beijing Technology and Business University.

Currently, China has four futures exchanges and 180 futures companies, with their locations radiating from Zhejiang, Beijing, Shanghai and Shenzhen to all parts of the country.

CIFC, a relatively large company, has professional futures analysts to help guide its trading process.

Fan Fuchun, Vice Chairman of the China Securities Regulatory Commission (CSRC) stated that the Chinese futures market has started to perform its functions. Some of the futures, such as copper, soybeans and cotton, have been exerting ever-growing influences on global pricing, and their price changes basically reflect the supply and demand situation in the domestic market and have formed healthy interactions with the international market.

Fan believes that the years ahead will witness rapid development of the Chinese futures market, as China has become a distribution center in the world for a large number of staple commodities and is playing an ever-growing role in the global economy. As a result, there are both huge potential as well as great demands for the development of a large-scale commody futures market in China.

Facing transitions

After 16 years of commodity futures trading, the Chinese futures market is facing a new transitional period oriented toward the joint development of commodity and financial futures transactions.

Liu Zhichao, President of the China Futures Association, revealed that the preparation work for launching financial futures has been proceeding smoothly. Thus far, relevant rules and regulations have been drafted and membership approval procedures have been formulated.

"The launch of financial futures will be a thorough face-lift for the current futures market," said Liu. "The structure of the futures market will be changed and optimized."

On September 8 last year, the China Financial Futures Exchange was established in Shanghai, and stock index futures are destined to be the first financial futures to be traded in that market.

Liu noted that after stock index futures are launched, China will carry out more financial derivatives trade. The financial futures market is welcomed by futures companies and traders. "It is paramount for enhancing the futures market," said Jin.

Jin believes that over 100 billion yuan of investment will be poured into the futures market after stock index futures are launched.

Foreign futures: wait and see

The Chinese banking, insurance, securities and trust sectors have been opened to foreign investment one after another in various forms, like forming foreign-owned or joint stock financial institutions. But the futures sector has lagged behind in this opening aspect.

Currently there are only two foreign-funded futures companies-one jointly founded by ABN AMRO Asia Futures Ltd. and China Galaxy Securities Co. Ltd. in May 2006 and another formed by French Credit Agricole Indosuez and CITIC International Financial Holdings Ltd. in March this year.

Theoretically, the Chinese futures market is open to foreign capital. The Regulation on the Administration of Futures Trading, which took effect on April 15 this year, stipulates that management measures concerning overseas institutions' establishment of branches on China's mainland and their acquisition of Chinese futures trading institutions and purchase of stakes from the latter shall be formulated by relevant government departments and put into practice upon the approval of the State Council.