China officially launched its new crude oil futures contract this morning at the Shanghai Futures Exchange in a move that is "an important measure of further opening up" of China's futures market, which also made Shanghai a stronger financial center.
The contract is traded on the Shanghai International Energy Exchange, a unit of the Shanghai Futures Exchange, and allows Chinese buyers to lock in oil prices and pay in yuan.
The launch of the yuan-denominated trading will potentially shake up pricing of crude oil markets globally and challenge the dominance of the current global benchmarks.
"Crude oil futures, as the first internationalized futures in China, is an important measure of further opening up .... and more importantly, it improves the internationalization level of our futures market," said Cao Yanwen, an official of the Shanghai Financial Service Office.
The contract aims to offer companies a hedging tool which can better reflect market conditions in the Asia-Pacific region, according to the exchange.