(Economic Observer) China uses national reserves twice a month to release strong policy signals

　　China News Service, Beijing, July 23, title: China uses national reserves twice a month to release strong policy signals

　　China News Agency reporter Zhou Rui

　　In the face of the sharp rise in international commodity prices and the transmission of risks to the country, the continuous increase in the prices of copper, aluminum and zinc drove the increase in PPI once to 9%. In less than a month, China’s “National Reserve Bank” opened its door twice. The market puts materials such as copper, aluminum, and zinc at low prices, hoping to "cool down" expectations of price increases and guide the return of market prices in a reasonable manner, demonstrating China's official determination to curb the rise in commodity prices.

　　Although the current market is still full of bullish expectations and a large amount of hot money participating in speculation, the official is full of confidence in realizing the policy goal of ensuring supply and price stability: in terms of materials, after years of construction, the current state reserves of materials are sufficient; in terms of policies, except The release of reserves, the official policy toolbox has just been opened; in terms of play, the release of reserves will not be a routine measure, but an arrangement that is tit-for-tat and hits on the spot.

New placement rules: direct to the entity, not allowing middlemen to make the difference

　　Market regulation is one of the important functions of national reserves.

Historically, Chinese officials have repeatedly used the reserve throughput adjustment function to resist economic risks and ensure supply security.

　　Since the beginning of 2021, due to the continuous evolution of the global epidemic, the more uneven recovery of supply and demand, the flooding of liquidity, and speculation and other factors, the prices of international bulk commodities have risen sharply and transmitted to the country.

　　In this case, the trick of "playing the role of reserve market regulation" was once again performed.

The National Development and Reform Commission and the National Bureau of Grain and Material Reserves decided to release the national reserves of copper, aluminum and zinc to the market in batches, and made special arrangements in three areas: "low", "practical" and "small" in terms of distribution rules.

　　The first is the low price.

The government has set a "ceiling" lower than the market price for this round of reserve placement, and guided by rules, companies have the opportunity to successfully bid at a lower price.

　　The second is the service entity.

The launch clearly requires that it be targeted at entities such as processing and manufacturing, and at the same time, as far as possible, the intermediate links such as traders who may "make the difference" are excluded, and measures are taken to prevent enterprises from hoarding.

　　The third is to help small and micro enterprises.

By letting the “subject” be as fragmented as possible, the government has helped small and medium-sized processing and manufacturing enterprises to fully participate in order to effectively alleviate the pressure on production and operation.

Twice in January: The effect is obvious, and it will restrain the upward momentum of prices

　　On July 5, China officially released 20,000 tons of copper, 50,000 tons of aluminum, and 30,000 tons of zinc to the market.

A total of more than 200 non-ferrous metal processing and manufacturing enterprises participated in the bidding, and all the copper, aluminum and zinc reserves put in were sold.

The transaction prices were 3% to 9% lower than the domestic futures prices on the day.

　　Xu Gaopeng, director of the Material Reserve Department of the State Administration of Grain and Material Reserves, revealed that the first batch of national reserves such as copper, aluminum and zinc have initially reached the expected target, and market prices have dropped to a certain extent after the announcement of the release.

　　Considering that the current commodity market prices are still high, many companies still have an urgent need to reduce the cost of raw materials. On the 21st of the same month, the government launched the second batch of national reserves of copper, aluminum and zinc totaling 170,000 tons: of which copper is 30,000. Tons, 90,000 tons of aluminum and 50,000 tons of zinc.

　　Market analysts are full of expectations for the effects of this round of launches.

　　Duan Shaofu, director of the Heavy Metals Department of the China Nonferrous Metals Industry Association, analyzed that the second batch of aluminum reserves has nearly doubled the scale of the first batch. As market demand continues to weaken slightly, it is expected that domestic aluminum ingot inventories will further increase, which will have a certain impact on aluminum prices. Downward pressure.

　　Zhao Wuzhuang, deputy director of the Political Research Office of the China Nonferrous Metals Industry Association, analyzed that as domestic copper enters the traditional off-season of consumption, the appropriate scale of reserves will help curb the upward trend of market prices.

Upgrade control capabilities: continuous optimization of delivery and introduction of supporting policies

　　In addition to entering the market to affect the supply and demand of "physical objects", the official adjustment of the bulk commodity market will also be enhanced in two ways.

　　The first is that the delivery mechanism is more flexible.

After the first launch, many market participants speculated that the official launch frequency was once a month.

It is reported that in the future, officials will comprehensively consider changes in market trends, supply and demand situations, and continue to release reserves to the market from time to time, and the scale of each batch will also be adjusted according to the situation to guide prices to further reasonable return.

　　Secondly, supporting policies will be rolled out one after another.

In addition to the release of national reserves of copper, aluminum and zinc, the official policy toolbox has just been opened. If the pressure on commodity prices continues to be high, the government will not only continue to release reserves, but also a series of supporting policies will be introduced.

　　It is reported that starting from August 1 this year, China will implement the "Management Measures for the Price Index of Important Goods and Services (Trial)."

The "Measures" emphasizes that the price authorities can conduct compliance reviews on price index behaviors and take disciplinary measures for non-compliance.

　　Market participants believe that the implementation of this new regulation will help promote the reasonable formation of market prices for important commodities and services, including bulk commodities, and promote the healthy development of China's price index market.

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