China's own policies made it a commodity price-taker

Charles Li Xiaojia is unhappy about conditions in global commodity markets.

In his blog last week, the chief executive of Hong Kong Exchanges and Clearing bemoaned China's lack of influence on global commodity prices.

At first this sounds like a bizarre thing to say. Ask any commodity trader, and he will tell you it was China's ballooning demand for resources that drove the long bull market which saw key industrial commodities such as copper more than quadruple in price over the first decade of this century. Far from lacking influence, China could hardly have had a bigger impact on prices.

Yet Li was merely echoing a complaint made periodically over recent years by Chinese officials. China, they grumble, is a price-taker in global commodity markets. In other words, China is forced to pay the prices set by overseas producers, in markets run by foreigners.

This is not how they think things should work. They believe that, as the world's largest importer and consumer of many commodities, and as the source of almost all the world's growth in demand, China should be the price-setter, able to dictate prices to its suppliers.

Of course, we can safely assume that if China were able to dictate prices in international markets, then, as an importer of commodities it would hardly insist on paying more. So what this boils down to is a buyer whingeing because he thinks he is paying too much, and would rather pay less for what he's getting.

This raises a couple of questions. First, you have to wonder why Li, as the man who presided over HKEx's takeover last year of the London Metal Exchange, the world's biggest industrial metals market, seems to sympathise with the complaint.