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Image of the Dalian (China) commodity market in 2018 Muyu Xu / Reuters
China has issued the clearest signal so far on Monday that it is willing to intervene to stop the rise in commodity prices, given the danger that their sharp increase could threaten economic recovery.
The powerful National Commission for Reform and Development (CNRD), the country's economic planning body, has announced a “zero tolerance” policy against any speculative practices that could inflate the costs of materials such as iron ore, copper and aluminum.
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The warning comes after the meeting held this Sunday between the regulatory authorities and the producers.
On the state side, representatives of the CNRD, the Ministry of Industry, the Commission for the Supervision and Administration of State Assets, the Securities Regulatory Commission and the State Administration for Market Supervision participated.
“Regulatory authorities will closely monitor the trend in commodity prices and strengthen joint supervision of futures and the spot market.
There will be zero tolerance for illegal activities;
Inspections will continue to be increased, and transactions that are out of the ordinary will be investigated, as well as malicious speculation, ”warns the CNRD in a statement published this Monday to report the conclusions of the meeting.
In addition, the Commission insists, "violations of the law, such as agreements that favor monopolistic practices, the spread of false information, price increases, hoarding and other illegal practices will be inspected and punished."
The CNRD statement had an immediate impact on the markets.
In the Dalian market, the price of iron ore fell almost 10%, the maximum allowed daily, to settle at 1,016 yuan (130 euros) per tonne.
For César Sánchez-Grande, head of Institutional Analysis of Income 4, the Chinese performance is positive.
“We want to control price speculation so as not to make the products that use these raw materials, such as steel, excessively expensive, a rise that endangers the economic recovery.
Current prices are at very high levels that would hardly support additional increases, and they are an additional uncertainty variable ”, he defends.
Sunday's meeting is yet another sign of the Beijing authorities' growing concern over rising commodity prices. Last week Prime Minister Li Keqiang already chaired a meeting of the State Council, the Chinese Executive, to address the issue. Then, the Chinese Government had already declared itself willing to take action on the matter to avoid "unreasonable" increases and that the increases ended up having an impact on consumer prices.
China is the world's leading consumer of materials such as coal, iron ore or copper. Its strong economic recovery after the COVID stoppage - its GDP grew by 18.3% annualized in the first quarter of the year - has triggered the demand for these raw materials, and consequently their prices, which have also been boosted by the prospect of the end of the lockdowns and the beginning of the global recovery after the pandemic.
With this movement, the Chinese authorities consummate their second intervention in the markets in just a week, after days ago they warned against the effects for the financial system of speculative investment in cryptocurrencies and restricted their exchange by the platforms. These actions are proving effective in the short term. Both the warning to commodity speculators and the one sent to cryptocurrency speculators had an immediate reflection in the form of falls in the prices of these markets, which Beijing considers overheated.
