China sees urgency of developing derivatives market

BEIJING, May 14 - China will quicken the introduction of currency derivatives to provide the world's third-largest economy with the risk-hedging tools it needs, a senior official said on Thursday.

The State Administration of Foreign Exchange (SAFE) will put the emphasis on innovation to widen the usage of foreign exchange hedging tools, Deng Xianhong, deputy director of the currency regulatory agency, said at a seminar.

"The development of China's derivatives market is not commensurate with its fast economic growth, which has led to growing multi-layered demand for investment- and risk-hedging," Deng said.

But he warned against the risk of heavy losses through blind investment and speculation.

The central government has periodically clamped down on speculative trading abroad following several cases of big losses racked up by state firms.

Nearly half of the Chinese firms trading derivatives abroad in the past two years did so without government approval, partly due to a lack of hedging tools onshore, officials have said.

The increasing internationalisation of the yuan also requires more developed derivatives, Yin Long, deputy director of innovation supervision at the China Banking Regulatory Commission, told the seminar.

Deng also called for speedier interest rate reform and greater competition in China's financial markets. He did not go into detail.