The world’s largest import market for crude oil debuted a crude oil futures market on Monday, when China opened its yuan-denominated crude oil contracts on the new Shanghai International Energy Exchange. On the first day of trading, crude prices rose 3.3% from an opening price of 416 yuan per barrel to close at 429.9 yuan.

According to the U.S. Energy Information Administration (EIA), China imported 8.4 million barrels of oil a day in 2017 to take over as the world’s leading importer. U.S. imports of 7.9 million barrels a day moved the United States down to second place.

China’s goal in opening a yuan-denominated futures exchange that is also open to foreign traders is to align international crude prices more closely with supply and demand conditions in the country. If that happens at all it won’t happen quickly, but the Chinese have a history of being patient.

The new exchange faces a number of hurdles. According to a report in The Wall Street Journal, traders are cautious:

[S]ome analysts say the number of restrictions on trading and fears of regulatory intervention in the market could over time limit domestic interest in the market.

Meanwhile, Chinese commodities markets’ reputation for high volatility, and the fact that the contracts are denominated in yuan, not dollars, could damp international investors’ appetite for the futures.

The Chinese government also imposes strict controls over moving cash out of the country. In order to attract more foreign traders, those capital controls likely will have to be changed. No foreign company is going to send money into China unless it is guaranteed that the cash can flow back out.

The most active contracts on the first day of trading traded at a discount of more than $1 a barrel to the benchmark Brent crude price in London. Most of China’s imported crude (about 600,000 barrels a day) is DME Oman grade, which traded at a discount of about $2.50 a barrel to Brent.

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