China hopes that the launch of new copper futures will drive further internationalisation of the renminbi given the country’s existing clout on the global commodities market.
The Shanghai International Energy Exchange (INE) rolled out yuan-denominated copper futures contracts on 19 November, in a move which the People’s Daily has hailed as “expanding the influence of the renminbi on global commodities markets.”
A report from the Financial Times points out that this is the first copper futures product in China that is directly available to overseas investors, and the use of the renminbi for valuation and settlement will increase China’s pricing power on global commodities markets.
Copper is the world’s most traded base metal, while China accounts for around half of global usage.
“There is no reason why China, being such a big consumer, shouldn’t be the price-maker…and not the price-taker,” said John Browning, managing director of Bands Financial, an international brokerage for Chinese commodity exchanges, in a November webinar.
China is now host to six international futures products, including crude oil futures, iron ore futures, PTA futures, TSR 20 rubber futures, low sulphur fuel futures and international copper futures.
All these futures are valued and settled in the renminbi, and permit offshore traders and brokerages to use the renminbi or the US dollar for security deposits.