Accessing Chinese Futures Markets with Derivatives
Mainland China has made great strides in opening up its futures markets to international investors in recent years. Apart from the conventional way of setting up a wholly foreign-owned enterprise (“WFOE”) onshore, an international investor could now access onshore futures markets in Mainland China by trading through an onshore futures broker (either directly or indirectly via an offshore intermediary), becoming a direct trading member of a futures exchange or trading onshore financial futures and (after the rules set out in the consultation paper on QFII/RQFII issued on 31 January 2019 by the CSRC (the “New QFII/RQFII Rules”) becoming effective) commodity futures through a QFII or RQFII.
International investors have also been considering using derivatives in the form of swaps, participatory notes and zero-strike warrants (“market access products”) to access Mainland China’s futures markets in the same way as they have accessed A-shares and CIBM markets. This bulletin examines some of the key considerations and issues when accessing Mainland China’s onshore futures market by market access products.