Study On The Relationship Between The China's Cotton Futures Market And The Spot Market

In the evolving world economy and development process, the Futures Market plays an extremely important role to play in the economic activities that found in the price, risk aversion and other functions, and also plays an important role in the national economy. In 1998, China's cotton market implemented the circulation system, the cotton market was completely opened in 2001, and cotton futures in Zhengzhou Commodity Exchange traded in 2004. At present, cotton is the second largest crop in China, and cotton production, consumption, import and export volume are the first in the world that plays an important role in the world cotton market.The article, In the context of financial crisis, first of all, drawing from the Spot Market at home and abroad is relatively mature theories and methods, using large amounts of data and charts, audio-visual reflecting the China's cotton Futures Market and Spot Market status, combined with the domestic economy, policy and the volume of cotton supply and demand, comprehensive analysis of the China's cotton Futures Market and Spot Market, and comes to the preliminary conclusion: China's cotton Futures Market and Spot Market interaction. Then the article describes the relationship in theory of China's cotton Futures Market and between the Spot Market, the Spot Market is a prerequisite and operation for the development of the Futures Market which can guide and regulate the development of the Spot Market. And then the article chooses the 2007 -2009 cotton Futures Market in China and the Spot Market price data for the two analysis: correlation analysis, based difference analysis; three tests: ADF tests, Cointegration tests, Granger causality test, empirical tests of China's cotton Futures Market and Spot Market. The results show that China's cotton futures prices can slow down the volatility of spot prices of cotton Futures Market, and Spot Market is highly relevant to the Futures Market between cause and effect which in prices plays a stronger role in guiding the market. Conclusions also show that during the period 2007 to 2009, China's cotton Futures Market is better in price discovery function, but worse in hedging function. Finally, under the financial crisis China's Futures Market identified a number of new problems, such as excessive speculation, the validity of the weak futures market. Based on the Industry Promotion Planning on cotton textile in 2009, the article proposes a new approach and recommendations, such as regulatory mechanism to enhance the Futures Market, deepen the reform of the Spot Market, strengthen the contact Spot Market and so on, improving China's cotton futures market and spot market.This study is a help to properly handle the coordinated development of the relationship between cotton Futures Market and Spot Market, enhancing the competitiveness of China's cotton industry. This study also provides the basis for relevant policy options and government of China's cotton Futures Market and Spot Market supervision and regulation, and is better for cotton companies and farmers to make better use of the cotton Futures Market to develop and adjust the business strategy, providing a reference to avoid operational risks.