China will roll out new copper futures in a bid to boost yuan adoption, pricing power – CNBC

A copper factory in Nantong, China.

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China will roll out a new copper futures contract this week that will be open to foreign traders, in a push to boost yuan adoption and wrest some pricing power away from the established industry benchmark in London.

The addition of copper, the world’s most-traded base metal, to a growing suite of international commodity futures will increase China’s appeal to the global trading community, analysts say, even if limits on yuan convertibility remain a barrier to wider adoption.

Such yuan-denominated products serve two strategic ends: they give global market participants another reason to use the yuan while also boosting China’s pricing power in key commodities markets.

“There is no reason why China, being such a big consumer, shouldn’t be the price-maker … and not the price-taker,” John Browning, managing director of Bands Financial, an international intermediary brokerage for Chinese commodity exchanges, said in a webinar this month.

The copper contract starts trade on Thursday on the Shanghai International Energy Exchange (INE), where China’s flagship international crude oil futures also trade.

Frederic Neumann, co-head of Asian economic research at HSBC, said two key requirements for international investors to use the yuan more widely were gradually falling into place.

The first is “availability of deep, liquid markets for financial products”, while the second is smooth convertibility of the yuan, on which Chinese authorities have taken “significant further steps over the past year to facilitate transactions,” Neumann