China Wants a Made-in-China Copper Price – by Clara Ferreira Marques (Bloomberg News – November 15, 2020)

(Bloomberg Opinion) — China’s next move to open up its commodities markets may be a step change. As of Thursday, overseas investors will be able to trade copper futures on the Shanghai International Energy Exchange.

It’s not the first such product: A yuan-denominated crude oil contract, launched in March 2018, has been modestly successful. A subsequent push to let foreigners trade iron ore in Dalian established a global benchmark. Copper could outshine these efforts, thanks to fortuitous timing, global appetite for an economic bellwether and the sheer clout of the world’s largest consumer.

The ambition is clear. Beijing wants increased pricing power in the commodities markets it dominates, specifically when the country imports that ingredient.

It no longer wants to be just a price taker. China also wants to bolster use of the yuan for transactions overseas, part of a sputtering, long-term strategy to raise the profile and influence of the currency.

At the same time, the government wants domestic companies to do more to hedge against volatility. Allowing foreigners to trade oil and iron ore — along with rubber, low-sulfur fuel oil and purified terephthalic acid or PTA, a petrochemical derivative — goes some way toward all of that.

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