Unfortunately, it may also be the most useless. This country's glitzy futures exchanges are fast becoming relics. After dabbling in almost every commodity imaginable in the past decade, including watermelon contracts, China has all but declared its "experiment" with futures a failure, too risky for the country's fragile financial foundation to support.

In the past three years, Beijing has throttled the industry, shaving the number of exchanges from more than 30 down to just three and banning trade in all but a handful of meaningless futures contracts like peanut kernels and red beans. Last year, regulators shut dozens of futures brokerage firms and issued rules that threaten long prison sentences for price manipulation.

The result: Daily trading at the Zhengzhou exchange, which local officials built in the mid-1990s when the industry was redhot, is half of what it once was. The few hedgers still active in its own domestic markets are often unable to execute orders. And as China's own futures markets wither, government-sanctioned traders are increasingly turning to global commodities markets, often roiling them with large and unexpected trades. "The crackdown hasn't been good for us," says Mr. Zeng, winding up a tour of the main trading hall, where almost half of the 150-odd traders are sleeping, reading newspapers or playing computer games on their trading terminals.

Behind this failure is a problem that has dogged China's financial industry since reforms began: The government opened the door to a new market without putting in place the regulations to oversee it. When China launched futures trading in this country a decade ago, the goal was to let the markets set prices for key agricultural products and spur reform in the country's backward farming sector. Dozens of exchanges sprouted up, trading in more than 50 different futures products.But with scant oversight, speculation quickly engulfed the industry, leading to a string of spectacular scandals.

Some state enterprises racked up huge losses borrowing money and speculating in obscure products like plywood. Regulators realized that far from reducing risk, the futures markets were exacerbating it.

While the ensuing crackdown has curbed speculation, it has also crimped badly needed agricultural reforms. Once China enters the World Trade Organization, as is expected later this year, the country's 800 million farmers will start competing with cheaper agricultural imports from overseas. But Chinese farmers are still unable to gauge if a market even exists for their crops, and if so, at what prices - something a functioning futures market would tell them daily.It's a vicious cycle that hurts everyone involved. Lack of market knowledge often leads to overproduction on the part of farmers.

That, in turn, forces Beijing to buy their produce at deeply subsidized prices to curb rural unemployment. Yet without a futures market, state farms and grain bureaus that buy the crops aren't able to hedge prices either, creating huge losses for the government.As losses pile up at home, Beijing sometimes tries to make up for that by buying or selling overseas - actions that often roil overseas commodities markets.

-- The Wall Street Journal