Derivatives Market In China

The liberalization of the Chinese planned economy to a market economy has been cautious (Lin, 2012; Chow 2011). The risk management objective for the transition has been proceduralized in the form of regulation (Black 2000). China need financial reform and regulation for derivatives (World Bank, 2012) but the risk of derivatives is real. The objective of permitting financial institutions to engage in derivatives is for risk management and not speculation. This discussion paper gives a brief overview of the short history of derivatives in China, the present derivatives available and discusses the pros and cons of derivatives. The conclusion is China need derivatives but it has to be firmly regulated.