State-owned Assets Supervision and Administration Commission of the State Council, Circular on Further Strengthening the Regulation of Financial Derivatives Transactions of Centrally-governed Enterprises

Issued: February 3 2009

Main Contents: The Circular orders a screening of the financial derivatives transactions of centrally-governed enterprises targeting futures, options, forwards, swaps and the portfolio products thereof (including financial derivatives of offshore organisations purchased through banks). Speculative transactions such as transactions that exceed the business scope, positions that exceed the limit, and positions that are held too long shall be stopped immediately and withdrawn within a specified time limit (Article 1).

All centrally-governed enterprises shall strictly adhere to the principle of hedging. The positions shall be commensurate with its spots and capital, and may not exceed 90% of the spots for value preservation for the current period. In general, enterprises shall not hold positions for more than 12 months or the time period specified in the spots contract, and may not irrationally engage in long-term transactions or renewal of transactions. No one may engage in financial derivatives transactions in the name of an individual or individual account (Article 3).