China targets ‘speculators and hoarders’ to stop boom in commodities
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Update time : 2021-05-25 21:06:39
China stepped up its fight against soaring commodities prices, summoning top executives to a meeting that threatened severe punishment for violations ranging from excessive speculation to spreading fake news.
The government will show “zero tolerance” for monopoly behaviour and hoarding, the National Development and Reform Commission said after leaders of top metals producers were called to a meeting in Beijing with multiple government departments on Sunday.
The push to rein in surging metals prices rippled across markets – with steel dropping as much as 6% and iron ore tumbling by close to the daily limit – before prices steadied later in the session. Most base metals were also under pressure.
“With policy risk shifting toward government intervention, prices will surely be affected by market sentiment,” said Li Ye, an analyst at Shenyin Wanguo Futures Co in Shanghai. “The rapid surge in commodity prices has badly affected manufacturers and market orders, leading to losses and defaults.”
There’s been a steady drumbeat of government warnings about the consequences of commodity prices that are near the highest level in almost a decade. But aside from changes to trading rules at futures exchanges, there hasn’t been a lot of action. Beijing is likely to face a “potential exhaustion of policy options” to restrain the rally, Citigroup Inc said in a note.
The warning from the NDRC comes as a broad surge in commodities prices fuels fears that faster inflation could dent economic growth in China and beyond. Investors have been piling into industrial metals on bets that the world will rebound strongly from the pandemic, but concerns about the knock-on impact on demand are rising as manufacturers are forced to raise the cost of finished goods.
“It might not be great for the speculative community, but it’s good news for the world in general,” Amelia Xiao Fu, head of global commodities strategy at BOCI Global Commodities Ltd said by phone from London. “I think prices could become calmer, and the room for excessive rallies may be limited.”
In targeting commodity prices, authorities are fighting trends over which they have only partial control as the world economy reboots with supply chains stretched.
The government is also tackling the consequences of its own efforts to reduce greenhouse gas emissions, which have contributed to price gains.
The NDRC’s statement is the toughest comment yet from the government, which started warning about higher raw-materials prices in April.
