LCQ7: Taking forward development of a commodity trading ecosystem
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Question:
Hong Kong's First Five-Year Plan (the Five-Year Plan) proposes developing a commodity trading ecosystem with gold as an entry point; it is also announced in the Chief Executive's 2026 Policy Address that a Joint Working Group on Commodity Trading (Working Group) will be established to take forward measures such as Renminbi (RMB) gold futures, international metal trading and warehouse-receipt financing. There are views that if Hong Kong can integrate the Mainland's demand for international energy with industries' demand for raw materials and commodities, it will help enhance the country's pricing power in the international energy and commodity markets, and promote the synergistic development of financial, trade and maritime services. In this connection, will the Government inform this Council:
(1) how the Working Group will co-ordinate the Hong Kong Exchanges and Clearing Limited, financial regulators and the industry to assess Hong Kong's strengths and shortcomings in commodity trading, clearing, delivery, warehousing, financing, insurance and risk management, and dovetail with the relevant tax concessions and infrastructure measures to formulate a development roadmap covering the next 5 to 10 years; of the priority projects, timetable and key performance indicators for each stage respectively;
(2) apart from the arrangements for RMB gold futures already announced by the authorities, how the authorities will implement the direction set out in the Five-Year Plan to enrich the variety of RMB-denominated and -settled commodity futures and options; whether they will, based on the genuine hedging needs of enterprises, accord priority to studying metal and energy products, and enhance supporting facilities such as RMB settlement and collateral, so as to attract the participation of local and overseas producers, traders and investors; of the relevant plans and timetables respectively;
(3) building on the existing cross-exchange product collaboration, whether the authorities will study with the relevant Mainland authorities as well as the four commodity and futures exchanges in Guangzhou, Shanghai, Dalian and Zhengzhou to establish, in phases, a mutual market access mechanism for commodity futures markets between the two places on the premise that risks are controllable and regulatory requirements of both places are met, including the feasibility of co-operation in cross-boundary trading arrangements for investors, mutual recognition of warehouse receipts, clearing and delivery, and cross-boundary collateral; if so, of the details of the commodities proposed for priority pilots, the regulatory and cross-boundary capital flow issues that need to be resolved, and the timetable for taking forward such initiatives respectively; and
(4) as there are views that the world's largest energy sellers at present are the 57 member states of the Organisation of Islamic Cooperation, while China is the world's largest energy buyer, and given that Maoming, which is adjacent to Hong Kong, is an important petrochemical base in Guangdong Province, Hong Kong should be in a position to connect the largest energy sellers and buyers and leverage Maoming's petrochemical foundation to establish a processing and delivery chain; whether the authorities will take forward the relevant work in this direction; if so, of the details; if not, the reasons for that?
Reply:
President,
The First Five-Year Plan for Economic and Social Development of the Hong Kong Special Administrative Region (2026-2030) (Hong Kong's Five-Year Plan) proposes developing a commodity trading ecosystem with gold as an entry point. The Chief Executive's 2026 Policy Address also announced the establishment of the Joint Working Group on Commodity Trading (Joint Working Group), led by the Secretary for Financial Services and the Treasury, to comprehensively review market opportunities and prospects for cross-exchange collaboration. As a major consumer and import-export market for commodities, the Mainland has a significant demand for commodities. Leveraging our unique advantages under "one country, two systems", Hong Kong is strongly supported by the Motherland and closely connected to the world to enhance the Mainland's pricing influence in global commodity markets, while simultaneously expand offshore Renminbi (RMB) business and foster the synergistic development of financial, trade and maritime services.
In consultation with the Hong Kong Monetary Authority (HKMA), the Securities and Futures Commission (SFC), the Insurance Authority (IA) and Hong Kong Exchanges and Clearing Limited (HKEX), the reply to the four parts of the question is as follows:
(1) Members of the Joint Working Group include the HKMA, the SFC, the IA, and HKEX. Representatives from other relevant bureaux and departments, as well as organisations such as the Hong Kong Precious Metals Central Clearing Company Limited will be invited to attend meetings as necessary. The Joint Working Group convened its first meeting in September this year to engage in in-depth discussions on the policy directions for developing commodity trading, exploring key areas such as market trends and Hong Kong's development potential. The Joint Working Group will continue to follow up on various subjects of priority and conduct assessment on the entire industrial chain covering commodity trading, clearing, delivery, warehousing, financing, insurance and risk management in Hong Kong.
Specifically, the Financial Services and the Treasury Bureau will be responsible for co-ordinating the overall policy direction and driving various supporting measures, including exploring the provision of tax incentives for qualifying activities within the gold and commodity trading ecosystem. The HKMA will review clearing, settlement and offshore RMB liquidity measures. The SFC will continue to enhance the regulatory regime for over-the-counter derivatives to facilitate risk and capital management for trading in gold and other commodities. The IA will focus on enhancing commodity-related risk management and insurance underwriting capabilities. HKEX will focus on market development, product innovation and cross-exchange collaboration.
The Joint Working Group will formulate a medium-to-long-term development roadmap for driving commodity trading in Hong Kong, setting out clear priorities and implementation timelines across different stages. The Joint Working Group will also maintain close contact with various stakeholders and market participants to gather market feedback, with a view to jointly building an internationally competitive commodity trading ecosystem for Hong Kong.
(2) The influence of RMB in commodity markets continues to grow with the progress of RMB internationalisation. The Shanghai Gold Exchange established its first offshore delivery vault in Hong Kong in June 2025 and launched RMB-denominated gold contracts for delivery in Hong Kong. In addition, HKEX has launched exchange-traded fund (ETF) with gold as the underlying asset denominated in RMB, and will announce details of a new RMB-denominated and physically settled gold futures contracts this year to boost the global influence of the RMB in the pricing of precious metals.
When considering the further development of RMB-denominated commodity futures and options products, apart from the practical hedging needs of enterprises, we will also take into account factors such as market foundation and liquidity, geopolitical changes, technological advancements and green transformation trends, with a view to ensuring the sustainable development of relevant products in terms of market demand, risk management and operational support. Regarding non-ferrous metals, we will fully leverage Hong Kong's unique advantages as an approved delivery point within the London Metal Exchange (LME)'s global warehousing network to drive the synergised development of more commodities related trading, risk management, and financing businesses. Regarding green energy, HKEX's Core Climate has successfully completed the first cross-border pilot scheme for China Green Electricity Certificates (GECs), facilitating transactions of around 100 000 GECs across 15 enterprises. Core Climate has also signed a co-operation agreement with the Guangzhou Power Exchange Centre to jointly promote the further development of the GEC market and expand international application scenarios for GECs. Furthermore, Core Climate will gradually explore the possibility of offering green energy and other environmental rights products to the market, collaborating with industry stakeholders to study suitable solutions that better serve corporate emission reduction needs. We will continue to explore enriching the diversity of RMB-denominated and RMB-settled commodity futures and options products, and announce the progress in due course.
To enhance supporting measures such as RMB settlement and collateral, HKEX's clearing houses have accepted Chinese Government Bonds as eligible non-cash collateral since November. This will help accelerate the pace of RMB internationalisation, attracting more relevant onshore and offshore producers, traders and investors to expand business in Hong Kong and establish an ecosystem for relevant commodities. The HKMA also launched the RMB Business Facility (RBF) last year to provide banks with stable and low-cost RMB funds. The size of the RBF was increased to RMB 500 billion in July this year, and tenors were extended to include nine-month, two-year and three-year to align with market development needs, thereby ensuring the timely provision of ample RMB liquidity to support broader RMB usage in the real economy.
(3) and (4) Establishing a mutual market access mechanism for commodity futures between the Mainland and Hong Kong is a long-term policy objective. Building upon existing cross-exchange product collaboration, and provided that risks are controllable and regulatory requirements of both places are met, we will actively explore drawing upon the successful experience of existing connect schemes to further promote the synergistic development of the commodity futures markets in both places. HKEX launched the Steel HRC (Hot Rolled Coil) Shanghai contract on LME in October this year, expanding international application scenarios of onshore prices and enhance the international influence of China's futures. The SFC and HKEX will continue to strengthen communication with relevant Mainland regulators to explore arrangements for various futures market mutual access mechanisms.
While promoting the development of the commodity trading ecosystem, we will also deepen co-operation with Belt and Road countries and other international market participants. Subject to market demand and feasibility, we will study how to better connect commodity buyers and sellers across different markets, fully leveraging Hong Kong's role as a "super connector" and "super value-adder" to further enhance the depth and breadth of the Hong Kong market.
Ends/Wednesday, November 4, 2026
Issued at HKT 16:06
Issued at HKT 16:06
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