Memorandum paves way for electricity futures contract

The Shanghai Futures Exchange has signed a memorandum with the China Electricity Council in preparation for the country's first futures contract for electricity, Shanghai Securities Journal reported on Thursday.

The signing marks a major breakthrough in the contract's launch, after the SFE has spent over a decade to study its feasibility in China.

The contract is believed to be able to help reveal electricity's market-based price, which will in turn knock out industry overcapacity and facilitate an industry upgrade.

At the moment, the government sets the electricity price in China through administrative measures.