A Classification Comparative Study On The International Pricing Influence Of China Commodity Futures

Over years, our country has been the world’s largest importer and consumer of many commodities. However, China has long been marginalized by international commodity pricing system, and lack of commodity pricing power in the international trade. In recent years, the international commodity price fluctuations resulted in tremendous cost for China, even to the extent of endangering its economic security. It is imperative to increase our influence on international pricing of commodity futures and establish our country as a pricing center of futures in the world.Based on systematic review of domestic and international literature, this paper discovered that the previous studies fall short in several terms-most of the researches merely conduct comparative study on single species, with very few studies analyzing in catagories, and most of the researches draw conclusions based on empirical studies, with very few of them analyzing the reasons lying beneath. This is largely because the lack of insights of international commodity futures pricing theory system, as most of the research are methodology-oriented-focusing only on verifying process and results while failing to further dig into the research value of the selected sample or to yield strategic and practical recommendations to improve China’s influence on international pricing of targeted commodity futures. To fill up the gap, this paper first defines influential power on pricing in international future trade, then use the method of statistical classification to catagory our country listed commodity futures into four groups: highly-dependent and highly active; highly dependent and less active; less dependent and highly active; less dependent and less active, based on their dependency for external goods and the level of activeness in future trade.Second, this paper use a large sample of time-series model to construct two variables SVAR. Adopting econometric methodologies including stationary test, co-integration test, guide the relationship test, impulse response functions and variance decomposition, it conducts empirical tests on China’s the international pricing influence of The first and third types of futures including goods such as palm oil, soybeans, natural rubber, copper, cotton, sugar, zinc, corn, wheat. The conclusions include that China’s influence on future pricing varies across different commodity fields, palm oil market is a "shadow market", China has grow certain influence on international pricing of certain goods, and the dependence on foreign goods is not a key factor in the international influence of pricing.Then, based on the annual data from2006to2012, this paper use chart analysis to analysis these futures in China by the method of comparative of species classification from domestic demand for goods, foreign dependency, domestic demand degrees, future trading activity and volume, etc.. The paper compares each category and among different categories to find out the patterns and the key factors affecting international pricing influence. Through a combination empirical of these various factors, this paper find that commodity demand and the dependence on foreign goods are the factors of influcing commodities international influencepricing power, but neither of these two is not a major factor. The key factor is trade volume of commodity futures volume. This is the innovative part on of this the paper; the former that was never tapped in literature from previous researches.has not been mentioned.Based on the conclusion of commodity futures trading volume being the decisive factor for international pricing influence, this paper set out from China’s commodity futures market actualities and take three varieties of commodity-natural rubber, palm oil and copper-as the typical cases to analyze the international pricing centers of these commodity futures. The study finds that anatomical regulatory system, laws, regulations and rules of the futures market trading settlement play a decisive role in the volume-Trade volume cannot achieve sustainable growth without proper supervision s institutions or legal regulation framework. In summary, proper regulation is critical for China to become an important player in international pricing. China’s rubber futures varieties witnessed increasing international pricing power, not because its influence got any stronger but because the influence of Japan as the center of the international rubber pricing mechanism was weakening. In order to become a strong player in international pricing, China needs to reform its current institutions including regulatory mechanism, legal framework and relevant policies. This paper proposed recommendations for such strategic transition for China.