CHINA may open up its commodities futures markets to overseas and financial investors, the country’s securities regulator said yesterday, as the world’s top consumer of many raw materials seeks to play a larger role in setting global commodities prices.

The three commodities exchanges in the country will also maintain a close eye on movements in the futures market, said Fang Xinghai, vice chairman of the China Securities Regulatory Commission (CSRC).

Fang said that regulators’ clampdown on speculation in raw materials futures has successfully reined in the frenzy.

Raw material markets in China were seized by a speculative frenzy in March and April that spurred a rapid run-up in prices and unprecedented volumes. The outburst prompted a crackdown from the CSRC and exchanges, which tightened rules and raised fees to discourage the surge amid concern it was excessive and could jeopardize efforts to cut back excess industrial capacity.

Fang said opening up the market would help support China’s role as a “price maker” globally and enable domestic firms to better cope with market volatility.

“China’s commodities market should be opened up to offshore investors,” he said, adding the country would look to start doing so in products such as crude oil, iron ore and rubber.

China is the world’s largest user of metals and energy, but its traders and companies rely on financial centers outside the country to set benchmark prices for the commodities they handle and consume. While raw materials trading in the nation remains largely off-limits to overseas investors, China has long pledged to open up.

The CSRC is also examining allowing banks and other financial institutions to enter the market, he said.

At present, foreign firms have limited access to China’s commodities markets. Firms are only allowed to trade via brokers after setting up a locally registered non-financial unit, which requires a hefty amount of registered capital. (SD-Agencies)