Huang Wensheng's remark was triggered by China Aviation Oil Holding Company's (Singapore), a firm listed in Singapore, recent announcement that it lost 554 million US dollars on derivatives trading. The company applied on Nov. 30 to the Higher Court of Singapore for debt reorganization.

"The goal for China's state-owned enterprises to participate ininternational oil futures trading is to lower its cost in importing oil and guarantee China's oil supply security rather than making money in pure speculation," said Cao Xiaoxi, deputy chief engineer of the Economics and Development Research Institute,Sinopec.

According to Cao, the international futures market is risky. Toplay in such a market, China's state-owned enterprises should makenecessary preparations for possible losses such as buying certain amount of futures while selling a lot.

As China's dependence on foreign petroleum increases, the ChinaSecurities Regulatory Commission began in 2001 authorize seven state-owned enterprises to engage in futures trading in international oil futures market, including the CAO.

According to the regulatory rules for state-owned enterprises, the futures trading amount of those enterprises should be confinedby the trading capacity of the company, the limits set by the license and the import and export quota of the company.

Li Yizhong, top official with the Commission for Supervision and Management of State-owned Properties (SASAC) under the State Council made statement Wednesday that the China Aviation Oil (Singapore) Corp. exceeded its authority endorsed by the SASAC of only doing time-bargain business.

The event of CAO in Singapore demonstrates the shortage of China's state-owned enterprises in monitoring system, experiences,human resources and capital strength when participating in international futures trading, said Niu Li, economist with the Economic Forecasting Department of the State Information Center.

Chinese companies must realize the risks contained in futures trading and learn to control possible risks within the acceptable limits, said Niu. More measures must be taken to ensure the effective implementation of the current monitoring system.

Niu also pointed out that although the CAO event draws the attention of China's state-owned enterprises to the risks of oil futures trading, they should not be afraid of or refuse to participate international futures trading as a result.

"With the rise of China's oil demand and the increasing instability of the international oil market, it's a trend for China to guarantee its oil supply by participating in international oil futures trading," said Niu.

With a registered capital of 3.6 billion yuan (435 million US dollars), China Aviation Oil is controlled and overseen by SASAC. The company established an aviation oil filling network in nearly 100 domestic airports and provides oil-filling service for 108 domestic and international airlines.

China Aviation Oil Holding Company, the corporate parent, owns 75 percent share in the Singapore company.

CAO in Singapore said Thursday that they will take their efforts to support the debts reorganization of the its Singapore company, but it would not be unconditional.