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The Shanghai Futures Exchange announced last Thursday that it will raise the level of trading margin for aluminum, copper, wire, gold, and fuel oil futures contracts from the original ratio to 10% from the close of settlement on November 29; zinc and rebar futures The level of trading margin will increase to 12%; the margin level of natural rubber futures contracts will increase from the original ratio to 13%.
Futures contract margins are usually proportional to trading risk and price fluctuations. Raising margins increases transaction costs and helps reduce speculation.
In October of this year, inflation in China rose to the highest level of 4.4% in two years. The State Council of the People's Republic of China launched a number of initiatives during its executive meeting last week to exercise control over the prices of a range of major agricultural products and energy products.
Wang Qinwei, a Chinese economist at London Economics Consulting's Capital Economics, said that the decision of the Shanghai Futures Exchange is yet another concrete step for the Chinese government to control inflation. He said: “The working conference of the State Council has given a direction, that is, their control over inflation is being strengthened. The meeting also gave some specific opinions. The decision of the previous period is a specific implementation step.â€
In addition to raising the level of contractual trading margin, the Shanghai Futures Exchange also announced that the limit for futures contracts for copper, aluminum, steel, wire rods, natural rubber, gold, and fuel oil should be increased to 6%.
In October this year, China's CPI rose by 4.4% year-on-year, far exceeding the 3% warning line set by the Chinese government. The price of food has become the main driver of CPI upward. Xinhua News Agency reported that the contribution rate of grain prices for the October CPI increase was as high as 74%.
Todd Lee, head of China Research at Global Insights, an economic consulting firm, said that rising prices for agricultural products and other commodities have become the main driver of China’s CPI. Excessive inflation not only affects the quality of China's economic growth, but also poses a threat to social stability. He said: "From the perspective of the Chinese government, to maintain social stability, relieve social dissatisfaction and limit the fluctuation of commodity futures prices is a necessary measure."
Zhou Wangjun, deputy director of the National Development and Reform Commission’s Price Department, recently stated that excessive currency issuance is a common problem facing the world in the near future. Excessive liquidity supply has contributed to the speculation of global commodity markets, and has been transmitted to China to promote price increases.
Wang Qinwei, a Chinese economist in the field of capital economics, said that the limit measures announced by the State Council’s work conference not long ago began with supply and demand, while the Shanghai Futures Exchange’s statement was intended to curb market speculation. He said, “Given the expected increase in commodity prices, there has been a marked increase in speculation in the market. Speculation has also contributed to the rise of commodity prices in the short term. The measures of the previous period are actually a powerful signal for the market and can be reduced. Market inflation expectations."
On Thursday, the National Development and Reform Commission of China released that, since November, China's domestic bulk commodity prices have fallen significantly. Among them, cotton has the largest drop, reaching 23.6%. In mid-November, China's domestic copper, zinc, rubber and other commodity prices fell more than 10%.
Bloomberg News quoted Che Hongyun, chief metal analyst of Galaxy Futures, as reporting that due to the global nature of commodity markets, it is difficult for any single country's policies to dominate the market. Che Hongyun believes that although the measures taken in the previous period were very decisive, it was difficult to influence market trends and trading behavior.
Wang Qinwei, a Chinese economist in capital economics, has different views on this issue. He believes that China's commodity market is not completely open. Therefore, the practice of suppressing market volatility in the previous period will at least receive expected results in the short term. He said,
“For example, the prices of gasoline and diesel are, to a certain extent, set by the government. Other commodity prices, such as food, can also be intervened by the government because the import and export of these goods are not a free market. There is a long time lag in the impact of international commodity prices on the domestic market."
China’s National Development and Reform Commission pointed out in a statement on Friday that, apart from the government’s regulatory measures, the recent decline in domestic commodity prices was also due to over-hype in the market in the previous period, and the price was out of the fundamentals of supply and demand, and the result of current capital gains.
The Shanghai Futures Exchange announced that it will increase the level of trading margins for several major commodities in the near future, and at the same time expand the limits on the extent of futures contracts. Experts said that this is the latest measure adopted by the Chinese government to prevent inflation from deteriorating. According to official data, China's commodity futures prices have dropped significantly since entering 11.