China Securities Regulatory Commission, State Economic and Trade Commission, Ministry of Foreign Trade and Economic Cooperation, State Administration for Industry and Commerce and State Administration of Foreign Exchange, Administration of Offshore Futures Hedging Business of State-owned Enterprises Procedures

Promulgated: 24 May 2001
Effective: as of date of promulgation
Interpreting authority: The promulgating authorities shall be responsible for the interpretation of the provisions with which they are respectively concerned (Article 52).
Applicability: These Procedures apply to all State-owned enterprises registered in the PRC, including enterprises in which State-owned assets make up a controlling or guiding interest (Article 2). For the purposes of the Procedures, "offshore futures business" means the participation of domestic enterprises in the trading of any standardized futures contracts listed on an offshore futures exchange (Article 3).

Main contents: The Procedures state that to engage in offshore futures business, an enterprise must obtain the approval of the State Council and a offshore futures business permit from the China Securities Regulatory Commission (CSRC) (Article 5). As part of the conditions for such approval and permit, the enterprise must have the right to import and export commodities and it truly needs to hedge the commodities it imports or exports offshore (Article 6). If the approval and the permit are granted, the enterprise shall apply to open a futures business deposit account and a dedicated foreign exchange account to the State Administration of Foreign Exchange (SAFE) for its offshore futures business (Article 8). The duly permitted enterprise can only engage in hedging business on offshore futures markets, and for this purpose, "hedging" means the trading in futures contracts to offset the spot price risk of the relevant commodities (Article 9). The enterprise is required to submit a hedging plan to CSRC for verification each year (Article 16). Moreover, its selection of offshore futures brokers and offshore futures exchanges shall be subject to the approval of the CSRC (Article 22). The foreign exchange exposure of the enterprise in relation to its hedging business shall be subject to annual review by the CSRC and annual registration by SAFE (Article 26). The Procedures also set out other compliance requirements on duly permitted enterprises (Part Five).