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Summary: The Rising International Commodity Prices

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Introduction

The rising International commodity prices continue to put pressure on global inflation, and with growing China’s economy, the huge demands from China is considered to be an important reason to push up the international commodity prices.
According to researches using FA-VAR method to build a complete macro-economic model with multi-variables, suggesting that: Firstly, the increase of Chinese demand is a significant factor of the rising international commodity prices; Secondly, The rising of China's interest rate, RMB/USD FX rate would restrain the international commodity prices; Third, the RMB exchange rate and interest rates will have a significant impact on international commodity prices, but the effect of the interest rate …show more content…

Specifically, the price trend of commodity, stock and bond markets should be determined by the investors' judgment on the investment environment, the business cycle and the macroeconomic environment. The study of the relationships between commodity market, stock market and bond market can not only help to understand the inherent relevance of the three markets, but also make a good judgment on the future trend of each market from the perspective of a larger …show more content…

In order to meet the needs of economic development, China has significantly increased the investments in domestic infrastructure construction and other fixed assets. Therefore, China's demands for commodities are also growing at a very high speed. Due to the relative disadvantage of domestic resources, which can not meet the increasing demand for bulk commodities. China has to import large quantities of commodities, such as iron ore, crude oil, copper, etc, from other resource-rich countries. As a matter of fact, the volatility of international commodity prices directly affects the commodity futures prices and spot prices domestically and internationally. As a result, the domestic producers’ production costs will also be affected, thereby affecting the national CPI level. The process can be called the spillover effect of international commodity prices on China’s financial markets.
According to China Futures Association, the combined trading volume of Shanghai Futures Exchange, Dalian Commodity Exchange and Zhengzhou Commodity Exchange has reached a record high level of 4.1 billion contracts in 2016, representing a 27% increase from 2015. China has been the largest commodity futures market by volume for 7 consecutive years. Turnover of all the exchanges also rose 30% to a new record high level, at RMB 177.4 trillion (c. USD 25.5

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