China's Bohai exchange to launch rubber trading in yuan

ERJ staff report (TP)

Tianjin / Hong Kong − China's Bohai Commodity Exchange, a local government-backed online trading platform for spot commodities, plans to launch cross-border trading in yuan for natural rubber, reported Hongmei Li for Platts.

It announced the plans in Hong Kong on Tuesday (17 December) during a roadshow to promote the new trading system, an unnamed exchange official said.

In April, the exchange became China's first non-financial organisation to get approval from the central government to offer yuan-based cross-border trading.

"Natural rubber is already being traded on our platform, so it will probably be the pioneer to try out this RMB [yuan] trading across countries," the official said.

The exchange has not decided when it will launch trading, as it partly depends on market feedback collected from future roadshows in Singapore, Thailand and New York.

China relies heavily on imported natural rubber, accounting for 80 percent of the country's total consumption, the exchange official said. It hopes to help trading parties minimising foreign exchange fluctuation and to facilitate trading by providing a new pricing and settlement scheme, he said.

The Bohai exchange has signed agreements with several international banks to provide yuan cross-border settlement services, the official said.

It is not alone in considering such services, as Singapore Exchange and Hong Kong Exchanges and Clearing signed a memorandum of understanding on 4 December to cooperate in promoting yuan internationalisation.

The Bohai exchange, based in Tianjin, opened for trading in December 2009 with crude oil and coking coal as the two initial products, later adding hot rolled coil/sheet in February 2010, rebar in western China in June 2010 and thermal coal in October 2010.

Its platform trades about 70 commodities, including metals, steel and agricultural products.

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Full story from Platts