By Global Times

China's securities regulator approved the establishment of the Guangzhou Futures Exchange in South China's Guangdong Province on Friday, making it the fifth futures exchange center in China.

Approved by the State Council, the China Securities Regulatory Commission (CSRC) officially approved the establishment of the Guangzhou Futures Exchange, which will play a critical role in improving the capital market system, Gao Li, spokesperson for the CSRC, said on Friday.

Gao said the center will also support the construction of the Guangdong-Hong Kong-Macao Greater Bay Area and serve high-quality development of the local economy.

It is possible that the Guangdong futures trading center will make carbon emission futures its first trading item, Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times on Friday, adding that a national trading center for carbon emission futures will be necessary for carbon neutrality to be realized by 2060.

The establishment of the Guangzhou Futures Exchange has been brewing for two years. At the beginning of 2019, the Party Central Committee and the State Council issued the "Guangdong-Hong Kong-Macao Greater Bay Area Outline Development Plan" and proposed supporting the construction of a green financial reform and innovation pilot zone in Guangzhou, as well as the establishment of an innovative futures exchange.

Lin said that the previous trials for carbon trading in eight different cities only bore "limited fruits," because of the lack of supervision and unified standards.

"For example, under previous carbon trade trials, a city could emit the carbon dioxide to other places with slacker restrictions or lower carbon emission prices," Lin said, whereas under one national trading system, alternatives to fossil fuels can be made more competitive.

According to Lin, the attempts to establish a more comprehensive national carbon trading system started three years ago, but once established, it could bring significant carbon emission cuts, especially in major carbon emission industries such as electricity.

The Guangzhou Futures Exchange will have a differentiated development path from the other four futures exchanges, and will enhance market participation by benchmarking the international market, according to China Securities Journal, citing industry insiders.

Apart from the Guangzhou Exchange, China also has the Shanghai Futures Exchange, Zhengzhou Commodity Exchange, Dalian Commodity Exchange and China Financial Futures Exchange.