Shanghai Futures Exchange Opens Doors to Foreign Investors in Move to Boost China's Influence in Global Metals Markets

The Shanghai Futures Exchange (SHFE) announced on Tuesday 34 new regulatory proposals aimed at opening China's futures market to foreign investors and brokers, as part of efforts to support the internationalization of the Chinese currency (RMB) and enhance China's influence in global commodity pricing.

The proposals cover multiple areas, including gold and silver options trading, hedging, and precious metals futures trading. The exchange emphasized that the goal is "full opening to foreign participants."

Tiger Shi, CEO of BANDS Financial, told Reuters that this announcement represents "a fundamental change in the Shanghai Exchange's constitution," noting that direct foreign access to the exchange's products is "now on the fast track."

Key proposed changes:

Allowing foreign brokers and investors to trade directly without the need for local intermediaries.

Accepting margin in foreign currencies such as the US dollar.

A public comment period on the proposals will be open until June 4.

A broader strategy to internationalize the Chinese market

This move aligns with an earlier announcement on April 21 by the People's Bank of China (PBoC) and three other government agencies, which included investments to promote the internationalization of the Shanghai Gold Exchange (SGE), including the establishment of international delivery warehouses, in preparation for competing with the London Metal Exchange (LME) for its role in global gold pricing.

A report issued at the time by Jinshi Data indicated that the plan aims to "enhance Shanghai's capacity as an international financial center for the allocation of global resources." It includes developing a platform for trading cross-border financial assets, supporting cooperation with foreign exchanges in product pricing, and expanding the use of renminbi reference prices in global markets.

Reshaping the Global Pricing Map

Although China is the world's largest consumer of precious metals, the pricing of most of its transactions remains tied to international prices, such as those issued by the London Metal Exchange. However, Beijing seeks to change this equation by making Shanghai futures a global benchmark, potentially dismantling Western dominance of metals markets for the first time in more than 140 years.

Reuters previously reported that China's success in attracting foreign traders to the Shanghai Exchange will give its contracts a global benchmark and reduce reliance on Western price signals.

In statements to state media, Wang Fenghai, general manager of the Shanghai Exchange, said that internationalizing the market is a prerequisite for strengthening China's influence in metals pricing. He added that the exchange is working to develop cross-border delivery capabilities by establishing warehouses outside China to store the metals associated with its futures contracts.