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Business Times
28-05-2025
- Business
- Business Times
China plans commodities overhaul to attract global investors
CHINA is on the cusp of its biggest move yet to open up its vast commodities markets, after the Shanghai Futures Exchange (SHFE) unveiled an internationalisation plan to streamline access for overseas investors. The country's biggest raw materials bourse is soliciting views on a proposal to let participants post foreign exchange as collateral for yuan-denominated trades, according to a statement on Tuesday (May 27). Restrictions on foreigners and their capital are an oft-cited reason for China's failure to punch its weight in international markets. The much-anticipated move would serve a number of purposes, including China's long-held ambition to more directly influence the price of the imported commodities on which its economy relies. It would also help burnish the yuan's appeal as an international currency to rival the US dollar in financial markets. SHFE, set up in 1999 and run by China's government, offers trading in contracts from copper and steel to gold, crude oil and petrochemicals. The country is the world's largest buyer of raw materials, but benchmark pricing for key commodities is usually set elsewhere, including New York and London for oil, London for base metals and Singapore for iron ore. 'It's time for yuan pricing to go global,' said Tiger Shi, managing partner at Bands Financial, who has been involved in China's commodities markets for more than two decades. Earlier, more modest moves to open up commodities futures have had limited success. The Shanghai International Energy Exchange, a SHFE unit, has offered yuan-denominated copper to overseas participants since 2020, and a crude-oil contract since 2018, but neither has made much of a dent in the dominance of international exchanges. The Dalian Commodity Exchange opened up iron ore futures in 2018, and that has found more traction as a benchmark. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up The latest plan appears to go much further, by proposing sweeping changes to ease participation across 18 of SHFE's domestic contracts. The exchange will overhaul rules on market access, trading, settlement, risk control and delivery to 'systematically internationalise' trading, SHFE said. It has asked for public feedback by Jun 4. 'This is welcome news,' said Zheng Jia, head of trading at Shanghai Soochow Jiuying Investment Management. 'It will attract more diversified participants and boost liquidity, and will also connect Chinese prices more closely with overseas prices.' Price setting The proposals would serve the country's broader opening-up strategy, while helping Shanghai to develop as an international financial centre and enhancing China's influence over global commodities pricing, SHFE said. Chinese authorities have pledged to expand cross-border financial services in Shanghai, the nation's premier commercial hub. A plan released in April vowed to help international investors become more deeply involved in trading platforms, and included a push to expand yuan-denominated pricing at the Shanghai Gold Exchange. 'The future direction is to develop the yuan into a trade financing currency, or a funding currency,' said Tommy Xie, head of Asia macro research at OCBC. 'An important function of any trade financing currency is the pricing of commodities.' Shi at Bands Financial said he expects nickel to be the first contract that SHFE opens up under its new proposals. He said the bourse's plan will complement other steps to bridge the gap between China's commodities markets and the rest of the world's. The London Metal Exchange – owned by Hong Kong Exchanges & Clearing – is poised to add warehouses in Hong Kong to its global network. That's aimed at giving businesses in mainland China an easier way to ship metal to the exchange, especially at times of market stress and major dislocations between Chinese and international prices. BLOOMBERG
Straits Times
11-05-2025
- Business
- Straits Times
Directors who fail to oversee firms set up for clients will likely be jailed: High Court
The onus will be on the offenders to explain why a jail term should not be imposed on them, said a three-judge panel. PHOTO: ST FILE Directors who fail to oversee firms set up for clients will likely be jailed: High Court SINGAPORE – Professional company directors who lend their names to help foreign clients set up companies in Singapore but fail to exercise oversight over these companies will likely be sentenced to jail terms. The High Court said the custodial threshold would be presumptively crossed for such directors when they are sentenced for failing to exercise reasonable diligence in carrying out their duties. The onus will be on the offenders to explain why a jail term should not be imposed on them, said a three-judge panel. The sentencing guideline was issued in a case involving chartered accountant Zheng Jia, who was fined $8,500 by a district judge in April 2024. Zheng, then 41 and a Singapore permanent resident, was also disqualified from acting as a company director for five years. On Feb 19, the prosecution appealed to the High Court against the fine. The High Court panel, led by Chief Justice Sundaresh Menon, allowed the appeal and sentenced Zheng to 10 months' jail instead. On April 24, the court issued written grounds for the decision. It said that Zheng operated a business of incorporating companies in Singapore, primarily at the behest of foreign clients. As Singapore companies are required to have at least one director who is a local resident, Zheng registered himself as a local resident director of these firms and helped in the opening of bank accounts. He offered these services through three Singapore companies. In November 2019, he set up a branch office in Shenzhen, China. His services were priced at between $1,000 and $1,400 annually. Investigations later revealed that he had incorporated or been registered as a director of 384 companies. This business model was so successful that Zheng recruited another person, Er Beng Hwa, to act as a local resident director and assist in opening bank accounts for companies set up on behalf of his clients. Both men did not exercise any oversight over the affairs of those companies. In 2020, substantial sums from overseas scams were routed through the bank accounts of three such companies. One of them was Ocean Wave Shela, which Zheng incorporated in May 2020 at the request of a client and helped the firm open a bank account in Singapore. In October 2020, an American company was deceived into transferring US$64,630 ($83,900) to the Ocean Wave account. The funds were then channelled to a bank account in China. For this, Zheng was charged with failing to exercise reasonable diligence as a director of Ocean Wave. In August 2020, Er was registered as a director and secretary of a company named Rui Qi Trading, which later opened two bank accounts. The accounts were used to receive and transmit the proceeds of scams perpetrated against three foreign companies. These proceeds amounted to US$2.18 million and $237,120. For this, Zheng was charged with intentionally aiding Er's omission to exercise reasonable diligence as a director of Rui Qi. Zheng pleaded guilty to the two charges. Under the law, each charge carries a maximum fine of $5,000 or up to a year's jail. A third charge was taken into consideration. It involved Er's directorship of another company, Eastar Holding, whose bank accounts were used to receive and transmit stolen money. In sentencing Zheng, the district judge relied on the framework laid out in a 2017 case. However, the High Court said that case should not have been relied on as a precedent. The judges set out a revised sentencing framework for cases involving professional directors whose business models were premised on providing no, or inadequate, oversight over the affairs of the companies. Under this framework, the sentencing judge would first identify the factors relevant to the offence, such as the duration of offending and the extent of the harm caused. Based on the number of factors, the judge would place the offence within three sentencing bands. At the lowest band – for offences involving one to three factors – the indicative sentence is up to four months' jail. At the highest band, offences involving more than six factors could result in nine months' to a year's jail. The sentence would then be adjusted based on factors specific to the offender, such as relevant antecedents and the extent of voluntary restitution. Applying the framework to Zheng, the court concluded that he should get three months' jail for the first charge and seven months' jail for the second charge. There was no change to the disqualification order. Er was separately fined $4,000 and disqualified from being a company director for three years. Selina Lum is senior law correspondent at The Straits Times. Join ST's WhatsApp Channel and get the latest news and must-reads.
