Financial China

China takes aim at commodities pricing power

  • Published 29 Oct 2009

The rapid growth of Chinese commodity exchanges suggest that enhanced international influence over prices could become a reality within several years.

It is well known that China is the biggest importer of most globally traded commodities. So why is it, then, that the world prices of oil, copper, iron ore, zinc, soybeans, sugar and a host of other commodities are set with little reference to the futures prices of such commodities on Chinese exchanges? One answer might be force of habit – simply that the world's financial architecture is configured to make the Chicago Board of Trade (CBOT), the London Metal Exchange (LME) and New York Mercantile Exchange (NYMEX) the main pricing benchmarks for commodity trade. Another might be that Chinese futures exchanges permit so little international trade that they lack the credibility needed to become global price setters.

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