Futures exchange expected to pioneer green development

China's new futures exchange in Guangzhou, Guangdong province, is expected to pioneer green finance efforts by launching the country's first futures contract related to carbon emissions, experts said on Sunday.

On Friday, the China Securities Regulatory Commission, the nation's top securities regulator, said it has approved the establishment of the Guangzhou futures exchange in order to realize China's blueprint for the Guangdong-Hong Kong-Macao Greater Bay Area and the pilot free trade zone in Guangdong.

"The exchange will focus on serving the real economy and green development, and will uphold an innovative, market-oriented and internationalized development position," the commission said in a statement.

The new exchange, as a major step in support of green development, is likely to make carbon emissions futures one of its flagship products, said Dong Dengxin, director of the Wuhan University of Science and Technology's Finance and Securities Institute.

Trading in carbon emissions futures typically means that companies that receive emission allowances or caps trade the right of polluting with each other in the futures market as a way to reduce environmental damage without causing undue economic hardship to related industries. None of the onshore exchanges currently offers carbon emissions futures.

The launch of these futures is expected to be part of China's stepped-up efforts to meet its goal of peaking carbon dioxide emissions before 2030 and achieving carbon neutrality before 2060. The Central Economic Work Conference held last month has urged quicker steps to come up with an action plan that enables the peaking of emissions.

China will support Guangzhou in piloting green finance efforts and launching an exchange providing carbon emissions futures, according to the development blueprint of the Greater Bay Area, released by the Communist Party of China Central Committee and the State Council in 2019.

The exchange should become the fifth futures exchange on the Chinese mainland and the first in Guangdong, which of all provincial-level regions on the mainland ranks first by economic output.

Dong said that as the first futures exchange in Guangdong, it will contribute to the Greater Bay Area development, adding that it is likely to roll out innovative products such as cross-exchange futures, focus on commodity futures and complement Hong Kong's advantage in financial futures.

Luo Xufeng, chairman of Nanhua Futures, an A-share listed futures company, said the Guangzhou futures exchange will help push ahead the innovative development and internationalization of China's futures market.

"As a corporate entity with diversified shareholders, the Guangzhou futures exchange is expected to pilot an operation mode that is more market-based and flexible," Luo said.

The exchange is expected to enrich the variety of onshore futures and introduce more overseas-traded futures, Luo said, with the country's carbon emissions futures likely to debut on the exchange.