It is imperative for China to be open to competition

Remarks by chairman emeritus of CME Group Leo Melamed at the BOAO Forum for Asia Annual Hainan Conference April 8-9, 2014.

It is always a great danger for a foreigner to offer advice to a foreign country. However, I have two strong reasons to take this risk. First, I feel that I would fail in my mission today if I neglected to state my opinion on what I believe are imperatives for China to next institute. And, second, while I was not born in China, I have been a friend to China for a very long time. As most people here know, it was almost thirty years ago, in 1985, that President Li Xiannian honored me by paying a visit to the CME. President Li was the first Chinese Head of State to visit the United States. He came to see me directly after seeing U.S. President Ronald Reagan. That was a monumental happening. I believe President Li, in his visit to Chicago, the capital of risk management, was telling the world that China was ready to change its economic direction. Li’s visit can be viewed as a prelude to the new economic blueprint that was subsequently fostered by Deng Xiaoping. A blueprint which brought China overwhelming economic success.

Most important, ever since my personal meeting with Li Xiannian in Chicago, I vowed to advance the capital markets in China. I knew that the greatest benefit from futures and derivatives markets will flow to the people of China. Like Deng Xiaoping’s white cats and black cats they will catch “market mice” in order to allocate capital efficiently. They will act like a gigantic insurance mechanism that allows inherent market business risks---in agriculture, foreign exchange, interest rates, and equities--to be adjusted quickly, more precisely, and at lower cost. They will serve the local economy.

During the years that followed, I maintained a strong connection with Chinese leadership and Chinese futures markets. The CME has invested considerable intellectual and monetary capital in efforts to educate and assist the futures markets in China. The CME executed Memoranda of Understanding with the Shanghai Futures Exchange, the Zhengzhou Commodity Exchange, the Dalian Commodity Exchange, and the China Financial Futures Exchange. We have provided workshops and symposia. I was personally honored with an appointment to the International Advisory Council of the CSRC. We have instituted a continuous visitation program between CME and Chinese officials that has proved of great educational benefit to both our nations. The latest visit occurred at the end of last year when we hosted a visit for former Vice Premier, Zeng Peiyan and former Ambassador Zhou Wenzhong.

Most important, we have maintained a close dialogue with CSRC chairman Xiao Gang and vice chairman Jiang Yang. In this respect, I am particularly grateful for the opportunity to meet with Vice Premier Wang Qishan. We have had fruitful discussions over the years. In 2005, I discussed with him and noted economist Cheng Siwei, that it would be important to create a futures exchange for financial instruments. We held a special seminar for this purpose in Shanghai. A year later, on September 8, 2006, with approval of the State Council and authorization of CSRC, the China Financial Futures Exchange (CFFEX) was born. It began trading futures on the Shanghai Stock Index, the CSI 300.

I have often been asked why do I come here to offer advice? Perhaps I have some hidden motivation? Well, the creation of CFFEX serves as a direct answer. CFFEX was an instant success and is today among the most successful futures exchanges ever devised. In promoting its launch, there was no other motivation. It was the same motivation that prompted me and the CME over the past 10 years to offer advice to all of the Chinese futures exchanges. It is the same mission the CME and I carried out globally for the past forty years. Clearly, those efforts helped make the CME stronger, but they equally advanced the foreign nation involved. Expanding the universe of futures is beneficial to all futures markets. That mission is no secret and its results are no mystery.  

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