How New Environmental Regulations Are Pushing Speculators Into Chinese Commodities

China Water Pollution

Sharp inflation for a variety of Chinese commodities is leading many in China to suspect investment speculation as the underlying cause, rather than simple consumption demand.

When commodity prices are volatile, farmers become traders:


This harvest season, Cao decided to wait for higher prices. And thanks to a wave of speculation and farm commodity-flipping in China’s agricultural market, his waiting game was likely to pay off.

“The price of new wheat this year has risen to 1.04 yuan per half kilogram,” said Cao, who plows the land in Hebei Province’s Zhengding County. “It was only a little more than 0.8 yuan last year, and it will likely go higher in coming days.”

One cause could be surplus investment capital, which is looking for places to make money. Oddly, new environmental regulations could be a major driver:

Wang Yuanhong, a senior economist at the State Information centre, said market demand is rigid for non-staples such as mung beans as well as staples such as wheat. That makes these goods vulnerable to short-term stockpiling and speculation.

Wang also thinks investment liquidity is driving up prices for bulk products such as wheat and cotton. Government controls aimed at discouraging investment in polluting, energy-intensive industries has encouraged investors to shift money to new arenas, such as farm product speculation.

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