Commodity trading in China has a short but high-growth history. With an increasing product variety and deepening

liquidity Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: * Market liquidity In business, economics or investment, market liquidity is a market's feature whereby an individual or firm can quic ...

pools, the mainland's

futures market A futures exchange or futures market is a central financial exchange where people can trade standardized futures contracts defined by the exchange. Futures contracts are derivatives contracts to buy or sell specific quantities of a commodity or f ...

is playing an increasingly important role in serving the national economy. At present, the

commodity market A commodity market is a market that trades in the primary economic sector rather than manufactured products. The primary sector includes agricultural products, energy products, and metals. Soft commodities may be perishable and harvested, w ...

s in China are still in a development stage, with only a few exchanges in China trading in a small group of commodities. In the next few years, the Chinese government will gradually allow more commodities products to be traded in China along with various related derivatives.

Size

Trading volume of the nation's three commodity futures exchanges totaled 40.97 trillion yuan in 2007, up 95% from the year before. The aggregate trading volume of these exchanges amounted to 728.46 million hands in 2007, up 62% over the previous year. More than half of the transactions took place on the Dalian bourse, while turnover on the Shanghai bourse amounted to 23 trillion yuan, accounting for half of the total. The boom of large trading market across the country has contributed to the increased flow of vegetables and fruit from south to north and west to east and promoted the country's

commercialization Commercialisation or commercialization is the process of introducing a new product or production method into commerce—making it available on the market. The term often connotes especially entry into the mass market (as opposed to entry into e ...

of agricultural products.

Development

The demand for

commodity futures In finance, a futures contract (sometimes called futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The item tr ...

as hedging tools has been on the rise as the Chinese economy continues to advance at a brisk pace. The country is now one of the largest producers and consumers of a wide range of commodities, including

oil An oil is any nonpolar chemical substance that is composed primarily of hydrocarbons and is hydrophobic (does not mix with water) and lipophilic (mixes with other oils). Oils are usually flammable and surface active. Most oils are unsaturate ...

steel Steel is an alloy of iron and carbon that demonstrates improved mechanical properties compared to the pure form of iron. Due to steel's high Young's modulus, elastic modulus, Yield (engineering), yield strength, Fracture, fracture strength a ...

copper Copper is a chemical element; it has symbol Cu (from Latin ) and atomic number 29. It is a soft, malleable, and ductile metal with very high thermal and electrical conductivity. A freshly exposed surface of pure copper has a pinkish-orang ...

corn Maize (; ''Zea mays''), also known as corn in North American English, is a tall stout Poaceae, grass that produces cereal grain. It was domesticated by indigenous peoples of Mexico, indigenous peoples in southern Mexico about 9,000 years ago ...

wheat Wheat is a group of wild and crop domestication, domesticated Poaceae, grasses of the genus ''Triticum'' (). They are Agriculture, cultivated for their cereal grains, which are staple foods around the world. Well-known Taxonomy of wheat, whe ...

and

soybean The soybean, soy bean, or soya bean (''Glycine max'') is a species of legume native to East Asia, widely grown for its edible bean. Soy is a staple crop, the world's most grown legume, and an important animal feed. Soy is a key source o ...

. To diversify their product ranges, the nation's three commodity futures exchanges are doing research to introduce new contracts. For example, the Shanghai bourse plans to launch new contracts on

nickel Nickel is a chemical element; it has symbol Ni and atomic number 28. It is a silvery-white lustrous metal with a slight golden tinge. Nickel is a hard and ductile transition metal. Pure nickel is chemically reactive, but large pieces are slo ...

silver Silver is a chemical element; it has Symbol (chemistry), symbol Ag () and atomic number 47. A soft, whitish-gray, lustrous transition metal, it exhibits the highest electrical conductivity, thermal conductivity, and reflectivity of any metal. ...

and

futures in the coming years. The Zhengzhou bourse is preparing to launch early long-grain non-glutinous rice futures, while the Dalian bourse is preparing to introduce hog futures to protect hog breeders from being exposed to sharp price swings. As a major producer and consumer of commodities, China has large potential for developing its futures market. China's commodity futures markets have expanded product ranges and deepened liquidity pools to cater to the increasingly diverse needs of the nation's rapidly growing economy. With increasing volatility in global commodity markets and prices, companies have been expanding their agricultural product, precious/base metal, fuel oil and other commodity-related investments in China.

Exchanges

There are three

commodity exchanges A commodities exchange is an exchange, or market, where various commodities are traded. Most commodity markets around the world trade in agricultural products and other raw materials (like wheat, barley, sugar, maize, cotton, cocoa, coffee, ...

in China after the merger of 50 exchanges into 14 in 1995 and subsequently into three in 1999. The

China Financial Futures Exchange The China Financial Futures Exchange (CFFEX) is a futures exchange established in Shanghai on September 8, 2006—with the approval of the State Council and the authorization of China Securities Regulatory Commission (CSRC). It is a joint venture ...

(CFFEX), the country's first financial futures exchange, was inaugurated in October 2006. The long-awaited CSI300, the first mainland stock index futures, will be traded on this bourse, which is working to the launch.

References

Emerging Exchanges overview
- the

United Nations Conference on Trade and Development UN Trade and Development (UNCTAD) is an intergovernmental organization within the United Nations Secretariat that promotes the interests of developing countries in world trade. It was established in 1964 by the United Nations General Assembl ...

(UNCTAD) * Peck, Anne E.
The Development of Commodity Exchanges in the Former Soviet Union, Eastern Europe, and China
Australian Economic Papers, Volume 40, Number 4, December 2001, pp. 437–460(24)

External links

1998

China: The fall and rise of Chinese futures, 1990-2005
{{Commodity exchanges in China Finance in China

Size

Development

Exchanges

See also

References

Further reading

External links