CPPCC Members Propose for an Early Experiment With Stock Index Futures

A number of members of Chinese People's Political Consultative Conference (CPPCC) from Hubei have jointly submitted a proposal to the Fourth Session of the Ninth CPPCC National Committee, suggesting that Wuhan take the lead in experimenting with a stock index futures trading market in China.

The proposal says that the pattern of capital flowing continually from central and west China to east coastal areas is incompatible with the strategic plan of pushing China's economic development forward from east to central and west China. Proceeding from the standpoint of "facilitating the control of risk" and "regional harmony of economic development", the proposal states that the stock index futures market should, on a trial basis, be first turned into a market independent of the commodity futures market and stock spot market.

The proposal, supported by Hubei provincial government, makes an analysis which says that as an ultra-large city in central and west China, Wuhan has a concentration of multiple advantages: it is in a unique geographic position; it is an important financial center in China's past and present; it serves as an important high and new technology industrial base-- all these provide Wuhan with the industrial foundation for experiment; and its status as a major communication hub furnishes communication conditions for experiment.

The proposal points out the urgency for experiment. Presently, business in the Chinese securities market is limited to spot transactions. Enormous price fluctuations have brought tremendous risks to investors and fund-raisers; the startup market, planned for spot trading, fails to help solve the risk-related problem. Setting up a stock index futures trading market is the only way out for eliminating the risks.

The proposal warns that judging from the development history of foreign stock index futures, other countries may possibly race to seize a niche in China's stock index futures market.

(China Daily 03/10/2001)