Chinese factors affect the global copper and aluminum market

International and domestic futures markets are making crazy roller coaster games. In the week just past, the Shanghai Futures Exchange's copper futures experienced a price drop, a daily limit, and a massive shock of up to 1,000 points. The prices of various metals on the London Metal Exchange also fluctuate significantly. On November 23, the Shanghai Futures Exchange issued a risk warning on the copper trading and asked all member units to do a good job of risk prevention. This is the third risk warning issued since September in the previous period. What are the factors that created the turbulence in the domestic and foreign futures markets? What subjects do speculators borrow for speculation? "The Chinese factor really works," said Dr. Roy Leighton, chairman of the UK Futures and Options Institute. "Since 1995, the global demand for copper and aluminum has increased 100% from China." Dr. Lei Leidong's influence in the international futures market can be of great importance. He also served as Chairman of the French branch of Crédit Agricole Berhad and chairman of the bank’s European Advisory Committee. On November 29th, this reporter interviewed Dr. Lei Leidong at the China World Hotel in Beijing. The 100% increase in global demand comes from China's "21st Century": Closer to the day, the international futures market is in turmoil, and some futures varieties in the London and New York futures markets have also seen a crash. Is this related to China's factors? Rui Leidong: If you want to analyze these futures contracts, you can really find that the Chinese factor is working. For example, for oil, China’s demand has had a relatively large impact on the entire world crude oil market. Of course, China is not a factor that causes market turmoil. The main cause of market turmoil is people's concerns about the market and their concerns about supply. Taking oil as an example, because Iraq’s oil supply capacity is not as high as it used to be. In addition, the Russian government has a very strong attitude towards Yukos and people are worried that it will be forced to stop oil production. This is like Iraq. Therefore, it cannot be said that market turmoil is caused by China's factors. In metal futures trading, China's influence factors are even greater. Especially the three major metals, copper, aluminum and nickel, China's demand has caused a very big impact on the market. In the past few years, the proportion of China’s demand for metals has been relatively large. When the Chinese government decided to regulate the overheated industries, there was a particularly tense mood in the world market, especially those institutional investors. In addition, mutual funds are also worried that these measures taken by the Chinese government will not lead to a decline in the demand for certain products. "21st Century": How much does China's demand for metal products account for global total demand? Rui Leidong: I can't guarantee nickel products, but copper and aluminum, since 1995, the global demand for these two metals has increased by 100% from China. My data refers to the increase in demand. "21st Century": What is China's profitability in the international futures market? Do you personally feel that China's futures trading in the international futures market is overall a loss? Rui Leidong: It is difficult to find enough information to make accurate judgments on the profitability of futures operations. Both I and the people I know in the industry believe that one of the characteristics of futures contracts is that there must be another contract to hedge against it. Chinese companies entering the international futures market need approval from the China Securities Regulatory Commission. At present, there are 25 such companies in China allowed to trade in the international futures market. Before the issuance of a license, the China Securities Regulatory Commission has a requirement for these companies that Chinese companies must be able to prove that they understand the risks of the international futures market. However, for China's domestic futures market, it is certain that some people will make a profit. This market is not yet open to the outside world. "21st Century": China's monetary policy adjustment and macro-control will have a very big impact on the international futures market? Rui Leidong: Changes in China's monetary policy are very important to the world market. I am very happy to see that a few weeks ago, the People’s Bank of China raised interest rates and intervened in the economy. In our opinion, this is a very reasonable strategic move. Personally, I personally believe that China has a very desirable system in many ways. It has a market economy system like that of the United Kingdom, which enables companies to continuously improve their profitability, encourage companies to go public and expand investment; she also has companies that the central plan controls, and in this way Under the system, the central government can take some relatively big actions. For example, if the central government thinks which industry has an overheated economy, it can take measures to reduce the number of banks providing loans to certain industries and cool down the economy. The aluminum industry is such a situation. The central government has a strong ability to regulate the economy. As an example, a few months ago, China increased the prices of agricultural products to promote the prosperity of the rural economy. For a long time, many people have a concern about China, that is, China’s long-term dependence on manufacturing exports. If the international market’s demand for Chinese manufacturing products decreases, what kind of impact will it have on China’s economy? Well, China now wants to make the rural economy more prosperous, with a focus on this direction. Therefore, the price of agricultural products has increased by 30%, which will increase the demand in rural markets. As long as domestic demand increases, even if exports decline, the impact on the domestic economy will not be so strong. People say that the United States in the 20th century is the larger buyer in the world. In fact, the domestic demand of the United States is also relatively large. China should launch financial futures "21st Century": From the international experience, what level of development do you think China's futures market is in? What kind of problems still exist? Rui Leidong: At present, China has three futures markets in Shanghai, Dalian and Zhengzhou, but it is mainly a commodity futures trading market. From the perspective of the trading operations of these three markets, it is still quite satisfactory. However, the scope of trading contracts has been limited. I think a more logical development direction is that China should further expand the coverage of commodity futures and include some important raw materials, such as crude oil, petroleum products and other metal varieties. China has no futures market for financial products. There are mainly two types of financial product futures, one is based on interest rate products and the other is based on stocks. In both of these categories, interest rate-based futures contracts can be based on government-owned or dominant bond products. I think the Chinese government can consider establishing a financial product futures market so that a more reasonable interest rate curve can be formed. For stock-based futures products, as far as I know, the Shanghai Stock Exchange is preparing. Shanghai wants to do stock index futures. This is a good start. In addition, it is also possible to carry out futures against the stocks of a listed company. Such futures have been slow to develop in the United States, but they have been faster in the United Kingdom. "21st Century": What policy do you have for developing China's futures market? Rui Leidong: My last suggestion is that the Chinese government should encourage the introduction of financial futures markets and corporate bond markets. This can not only promote the development of China's futures market, but also enable companies to find financing channels other than bank loans. Another suggestion is that the Chinese government should encourage foreign companies to participate in the Chinese futures market. At present, China's stock market has A shares and B shares. Foreign investors can purchase these stocks on exchanges in Shanghai and Shenzhen, but they do not have a comparable, open futures market. "21st Century": Does the Administrative Control Have a Great Impact on China's Futures Market? Rui Leidong: Problems may have arisen in this area a few years ago. Administrative regulation has actually inhibited the development of some enterprises. However, China's administrative management of the domestic market is necessary and its operation is still good. However, financial derivatives can also develop faster. There is no such product in China at present, only some banks are engaged in the swap business. "21st Century": Does talent restrict the development of China's futures industry? Rui Leidong: China's rapidly developing market does require highly trained and experienced personnel. Many international agencies are willing to train such talents for China and provide training in futures and even options that China does not currently have.

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