Emerging Impact of Chinese Commodity Futures Market on Domestic and Global Economy

21 Pages Posted: 21 Jan 2014

See all articles by Zhiyong Tu

Zhiyong Tu

Peking University - HSBC School of Business

Frank M. Song

The University of Hong Kong - School of Economics and Finance

Leonardo Zhang

Peking University

Date Written: November-December 2013

Abstract

In this paper we construct a set of indices that capture the special features of the Chinese commodity futures market for the period from January 2000 to December 2011 to analyze the general properties of China's commodity futures market. Using these indices we investigate the risk premiums of Chinese commodity futures and verify that the commodity futures can act as an effective diversification tool for Chinese asset management. It is found that the commodity futures can hedge both expected and unexpected inflation in China, and agricultural commodity futures are found to signal inflation 2 months beforehand. Finally, we explore the relationship between Chinese and US commodity futures markets in the years 2000 and 2010, and find that their interactions strengthen over time. Our research reveals an increasingly important role of the Chinese commodity futures market in both the domestic and the global economy. Some policy changes are suggested in response to this trend.

Keywords: Chinese commodity futures, property

JEL Classification: G10, G11

Suggested Citation

Tu, Zhiyong and Song, Frank M. and Zhang, Leonardo, Emerging Impact of Chinese Commodity Futures Market on Domestic and Global Economy (November-December 2013). China & World Economy, Vol. 21, Issue 6, pp. 79-99, 2013, Available at SSRN: https://ssrn.com/abstract=2382305 or http://dx.doi.org/10.1111/j.1749-124X.2013.12047.x

Zhiyong Tu (Contact Author)

Peking University - HSBC School of Business ( email )

University Town
Nanshan District
Shenzhen, Guang Dong 518055
China

Frank M. Song

The University of Hong Kong - School of Economics and Finance ( email )

8th Floor Kennedy Town Centre
23 Belcher's Street
Kennedy Town
Hong Kong

Leonardo Zhang

Peking University ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

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