China’s approach towards capital markets reform – sticking to a deliberate pace – has often infuriated market participants. From the liberalization of bond markets to the granting of licences for Sino-foreign securities joint ventures, Beijing has developed a model of piloting measures in a controlled environment before gradually broadening their reach once the implications are understood. This can make for agonizing waits for those who wish to make money fast from the world’s most promising market but it also reveals an intelligent attitude towards reform that is often not given sufficient credit.
Take the late March announcement that Beijing would allow stock index futures trading to begin as soon this month. The initial reaction from some market participants was something akin to annoyance at the high barriers to entry. Investors who wish to trade these contracts will require Rmb500,000 ($73,000) to open an account, and are expected to be required to post cash margins of at least 15%. They will need to pass exams set by responsible futures brokerages to assess their suitability. They also are expecting to have to demonstrate a safe trading record of mock trades before they can get their hands on the real thing.