On Dec.22, the Dalian Commodity Exchange will introduce foreign traders to trade the domestic Palm Olein futures. Palm Olein futures were listed on DCE since 2007, which is the first future variety of all imported commodities in China. Over the past decade since its listing, the market has been running steadily, thus developing into the world's largest palm olein futures market. Although China is not a palm olein producer, trading palm olein is still active in the mainland China, and the demand of the Chinese market has an important influence on the international palm olein price. The correlation between the futures price of palm olein of DCE and the prices of related varieties of foreign exchanges is increasing. "Malaysian palm olein futures mainly follow the price fluctuation of palm olein futures in DCE. In fact, China is the best customer for palm olein producing countries such as Malaysia," says Xuezheng Hou, deputy general manager of the olein business department of China Cereals and Oils Holdings.

Restricted by trading rules, internal and external palm olein prices often appear "upside down", which troubles the operation and trade activities of industrial chain enterprises. Shiyong Zhou, chairman of Beijing Heyirong Investment Group, said "Domestic prices are closely related to downstream demand and domestic demand largely determines domestic prices. However, overseas production is based on local prices, which leads to the phenomenon of 'upside down' prices in and outside the palm olein market." Shiyong Zhou said that after the internationalization of DCE palm olein futures, the global palm olein price will be more reasonable which will bring a lot of benefits to the trade of domestic enterprises. On the one hand, it can provide the price information of real origin for domestic enterprises. On the other hand, it can also bring better hedging tools for the upstream. In addition, for overseas enterprises involved in domestic transactions, the internationalization of DCE palm olein futures will cutoff some intermediate links, which will smooth the operation of the trading cycle.

The internationalization of Palm olein futures is an important manifestation of China's futures market opening to the outside world which is also a beneficial attempt to promote the real economy and futures market to form a healthy economic environment.

From Chinese Security Journal