With inflation hitting a two-year high in September, China’s economic policymakers are taking steps where ever they can to stall the rise in prices, particularly of food and property. Securities regulators are now pushing for curbs on commodity futures trading in the hope of damping down excessive speculation (the ever-present bugaboo when commodity prices rise). The Shanghai Futures Exchange is raising its margin requirements on natural rubber contracts to 11% from 8% while the Zhengzhou Commodity Exchange has already raised margins for rice, wheat, rapeseed oil and sugar to 8% from 3% or 4%. Rice and rubber futures hit record prices this week. along with those of cotton.
The new margin requirements follow the central bank’s surprise rise in benchmark interest rates earlier this month, and a raft of measures over months and months to let down the property price bubble inflated by the liquidity the government pumped into the economy in the wake of the global financial crisis. We would expect central controls on commodities trading if the self-regulation of the exchanges fails to drive down prices.