ZHENGZHOU, China -- Chinese leaders are concerned that their nation's enormous economic expansion is becoming an excuse for foreign suppliers to inflate commodity costs. So, they hope to use their three futures exchanges to fight back.
Government officials say the country is positioning its futures markets to be major players in setting world prices for metal, energy and farm commodities. By letting the world know how much its companies and investors think goods are worth, China hopes to be less at the mercy of markets elsewhere.
"It is true we have a long-term goal of increasing our influence in terms of pricing, but to do that we have to create conditions and do it step by step," Jiang Yang, chief futures-industry policy maker and assistant chairman of the China Securities Regulatory Commission, said in an interview. "But as the Westerners say: 'Rome was not built in a day.'"
Now in China's scopes: the $130 billion it spent importing oil last year.
Globally, crude oil is the biggest and most important traded commodity, and China is the second-largest importer after the U.S. The New York Mercantile Exchange's contract for light, sweet oil -- a grade of crude easily refined into gasoline -- is the world's most actively traded one and is thus the dominant mechanism for setting the global price.
But as early as next year, the Shanghai Futures Exchange may muscle in with its own contract in crude oil, possibly modeled on New York's global benchmark, according to people familiar with the situation. That would, for the first time, give Chinese traders a direct role in valuing the commodity. "We are actively thinking about crude oil now," says one of the people involved in the planning.
The emergence of major stock, bond and commodity markets in nominally communist China is one of the starkest examples of the nation's embrace of capitalism. As China marks the 60th anniversary of the founding of the People's Republic this month, the nation is celebrating its rise as an economic superpower. Beijing is increasingly eager to assert its clout -- challenging international policy makers to rethink the global currency system, how multilateral institutions are run and the direction of global trade talks.
To be sure, China's fledgling futures markets don't pose any immediate threat to the giant exchanges in New York, Chicago and London that set benchmark prices for most commodities. For one thing, the Chinese challengers are largely closed to foreigners, and government-owned entities are among the biggest traders -- hardly a recipe for a freewheeling global marketplace. At most, the emergence of big futures exchanges in China is giving Chinese companies and speculators a role, but not control, in determining global costs alongside traders in the West.
But Beijing believes hosting big futures markets will enhance the country's economic security by essentially advertising what the world's biggest customer for some commodities considers a fair price. For the rest of the world, the exchanges could mean less guesswork about China's buying habits, possibly reducing volatility in the global market. Already, copper and soybean suppliers shift output toward or away from China depending on how its futures prices are moving. Increasingly, traders say, Chinese futures appear to drive price trends elsewhere, particularly in metals like copper.
An expanding list of 21 commodities traded on China's exchanges includes many of the goods imported in vast quantities by the world's fastest-growing major economy. China buys 10% of all crude oil, 30% of copper output and 53% of the world's soybeans, according to Barclays Capital.
American consumers are already feeling China's buying power in commodities. In 2007 and 2008, markets were gripped by a belief that surging car ownership in China and other developing countries was destined to drive crude oil ever higher. That thinking helped send oil futures soaring in New York to a peak of $147 a barrel in July 2008. American drivers saw the average price of gasoline rise 85% between late 2006 and July 2008. Then, worries about global recession pushed gasoline prices almost two-thirds lower last year.
Early this year, traders determined that China was stocking up on crude -- and oil prices have rebounded 61% so far this year.
Futures are exchange-traded contracts that fix a price to buy or sell sugar, copper or oil a day, month or year in advance. Basic food, energy and raw-material costs are determined on commodity-futures exchanges, affecting everything from the sticker price of automobiles to the cost of gasoline at the pump and a hamburger at a drive-through window.
Chinese historians claim the country originated a version of grain futures contracts some 800 years ago, during the Song Dynasty. Modern-style futures trading began almost 160 years ago in Chicago with corn.
In the early 1990s, China was eager to demonstrate its embrace of market economics and launched stock and commodity-futures trading.
But there wasn't much planning. More than 50 commodity exchanges sprang up, many of them trading primarily lu dou, or green mung beans, a variety that after soaking stretch into crunchy white sprouts.
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