China buys more raw materials than any nation, but that doesn’t mean it always gets the best prices. So the government is altering domestic commodity exchanges to bring in more foreign investors and expand the country’s influence on global markets.
Two decades of rapid economic growth has left the world’s biggest population consuming more food, energy and metals than it can produce, turning the country into a powerhouse importer. Still, the value of many purchased commodities, from crude oil to soybeans, is set by global benchmarks priced in dollars on exchanges in other countries, where markets are more open.
As part of this plan, exchange operators plan to add future contracts for key raw materials including apples, pulp and urea fertilizer, as well as options on corn and others. Despite bullish comments by officials, however, some question whether authorities have the appetite to truly open up.
“Internationalizing its futures market can boost China’s sway on global prices and help it eventually become a price-setter instead of a price-taker,” said Han Qian, associate professor of finance at Wang Yanan Institute for Studies in Economics at Xiamen University. “It not only fits into China’s strategy to promote global use of the yuan, but also frees domestic producers from foreign exchange risks.”
source: bloomberg.com
