CHINA has denied that two Hongkong companies have been given approval to handle foreign exchange futures trading on the mainland. In an unusual move, the New China News Agency quoted an official from the State Administration of Exchange Control as saying Emperor International Exchange Co and Frankwell Holdings had not been approved to engage in the business. ''Since foreign exchange futures trading is a high-risk and skill-demanding area, only financial institutions which have obtained the approval of the People's Bank of China and the State Administration of Exchange Control can engage in the business,'' said the official. In Hongkong, both companies named by the State Administration of Exchange Control said they had not declared that they had obtained licences to operate foreign exchange futures trading business. But a spokesman for Frankwell Holdings yesterday admitted the company was operating pilot foreign exchange trading operations in Shanghai and Guangzhou in co-operation with mainland partners. Mr Harry Mok Chi-kwong, head of the company's information department, said the company had set up two joint ventures with the Guangzhou Radio Station and a subsidiary of the People's Bank of China Guangdong branch. He said the two joint ventures were only given business permits by the municipal industrial and commercial administrative authorities, which did not authorise them to enter into foreign exchange trading. ''As far as I know, there is still no company in China which is operating foreign exchange trading with a licence,'' said Mr Mok. ''We have told our clients explicitly about this.'' Although Mr Mok admitted such unauthorised companies could be closed at any time, he did not believe the State Administration for Exchange Control would take that drastic step. ''Even if such an order is issued, its implementation will have to be carried out by the administration's local branch and relevant local governments,'' he said. Mr Mok said local governments allowed such companies to exist on an experimental basis and more than 10 Hongkong companies were believed to be offering foreign exchange trading services on the mainland. The vice-chairman of Emperor International Exchange, Mr Sonny Yeung Hoi-sing, said his company had gained approval earlier this month to take part in commodities trading in Xiamen. Under the permit issued by the Ministry of Foreign Trade and Economic Co-operation, the company can engage in the trading of commodities but not foreign exchange futures. Meanwhile, China has decided to give the green light for approved mainland financial institutions to handle spot foreign exchange transactions for individual clients in an apparent attempt to crack down on illegal trading. Following more than a decade of economic reform, China's foreign currency deposits by individuals have reached some US$10 billion, leading to the proliferation of unauthorised foreign exchange trading in major cities.
