Chinese regulators are hurrying to relaunch the government bond futures market after an 18-year hiatus as China tries to funnel investment into the struggling private sector and prepare to liberalize bank deposit rates, traders said.

A healthy bond futures market is a key requirement for the next, riskier step of freeing up savings deposit rates.

The market was shut in 1995 after a trading scandal led to the collapse of the country's largest brokerage.

This time, regulators hope government bond futures will have a rejuvenating effect on financial markets as the economy slows but the government presses on with reforms.

With better pricing of money and more hedging tools for banks, regulators hope to encourage State-controlled commercial banks to spurn safe lending to powerful State-owned firms in favor of riskier, but potentially profitable loans, to private companies who create the majority of jobs.

Traders told Reuters the China Financial Futures Exchange (CFFEX) could start bond futures trading as soon as August 16, earlier than expected, after approvals were obtained from the State Council, the cabinet, and regulators.

The CFFEX currently only lists stock index futures.

Reuters