Research On Commodity Financialization And Its Transmission Effects

In the process of commodity buying and selling, commodity Financialization refers that, price forming is affected by physical market’s supply and demand, as well as by financial derivatives market. Its theoretical basis is commodity financial prices determinism. The phenomenon of financial innovation in commodity trade first appeared in the 16 th century in Netherlands, then in the Britain and the United States. They has been improved and the widespread in such regions. After the 1970 s, the traditional exchanges of open-outcry were gradually replaced by the electronic platform of computer. The trading volume of commodity derivatives has exceeded the physical volume several times. How Commodity trading financialization phenomenon behaves, how it affects the real economy, and changes the traditional commodity price formation mechanism become attention of this paper.Firstly, this paper reviews the history of commodity financialization. This paper found that commodity financialization development must have the four key factors: liberalization and transparency of market organization;Good market economic governance framework;Trading commodities homogeneity; The physical market development.The futures market as an important form of commodity financialization, it has the function of price discovery and hedging, making it become the important platform to trade in bulks. By comparing the futures and spot market data, this paper found that before and after the 2008 financial crisis, the futures trading suddenly explosed, aluminum, zinc and other non-ferrous metal toped 8 times of ups and downs within a year. Soybeans, wheat and other commodities also have experienced more than three times the price of ups and downs. A few years before and after the outbreak of the financial crisis, the cash flow was even greater than the sum of the past trade amount.After the empirical research of the future prices of non-ferrous metals, steel and farm products, the paper suggests that the commodity financialization is a kind of effective means of hedging, locking the enterprise’s production costs, reducing the risks of price fluctuation, this kind of financial innovation is affected by monetary policy. Macroeconomic factors dominated the commodity the price of financial derivatives to some extent. During the financial crisis in 2008, commodity financialization was excessive, producing certain financial bubbles. The empirical results also show that the price conduction performances of China’s non-ferrous metals and steel market were good. On the contrary, the market of agricultural products was the worst. Our country’s commodity trading center still has certain gap with the international market, especially, the price discovery and hedging function of China’s agricultural products market are inferior to foreign futures market, thus, it should further strengthen our country commodity financialization positive role. By simulating the futures market hedging behavior of the enterprise, China’s commodity futures market profit yields an average of about 10% each year. Thus, the enterprise using commodity futures hedging operations can effectively control the cost of production.Compared with the international market, the function of the futures market in China has a certain gap, thus caused the price of raw material market difference at home and abroad. When facing a lot of financial capital arbitrage, the domestic market price system is very fragile, threatening to the industry security. Through empirical methods, such as long-term volatility, DEA model, this paper analys the industry of the textile, ferrous metal smelting and rolling processing industry, non-ferrous metal smelting and rolling processing industry, agricultural and sideline food processing and ect. Totaliy ten industry security postures are tested. The results show that the overall levels of China’s nonferrous metals industry are integrated with international market. And the industry of agricultural products, especially, the wheat, corn, cotton, sugar and other related raw materials industries, have a certain gap with the international level, so that the textile industry, food industry, beverage manufacturing industry has certain industrial safety trouble.On this basis, this paper summarizes the variety paths of commodity financialization impact on industry production, puts forward four stages of the financialization industry development: stage of commodity trade protection stage, stage of the country’s commodity trading center development, the synchronous transition stage of domestic and international commodity trading center, and the mature stage of commodity pricing center.Our country’s food manufacturing industry and beverage manufacturing industry are in the first stage; Leather, fur, feather and its products, textile and garment, shoes, hats manufacturing are transiting from the first stage to the second one; Textile industry is in the second stage;Fabricated metal products, agricultural and sideline food processing are transiting from the second stage to third one; Black metal smelting and rolling processing industry, non-ferrous metal smelting and rolling processing industry are in the third stage.A general summary and policy suggestions in macroscopic level and future research prospects are given at the end of the paper. It argues that the biggest obstacle of China’s commodity financialization is not the financial trading platform, but the government’s idea transformation. The government should further decentralize; let more foreign participants enter extensively, make channels more diversified. As a result, this paper develops policy suggestions of financial strategy, pricing power support system, macroeconomic management.