Data Trends for Investment Professionals


An Introduction to Chinese Futures Data

Chinese futures data has always been in high demand among our users. For years, China consumed more commodities than any other country. The current economic slump and “commodities hangover” have only heightened the interest in data on Chinese futures. That’s why we’re especially excited to offer these new free databases on the four mainland exchanges.

Chinese futures and the commodities hangover

The impact of booms and busts on commodities is nothing new, but China’s rapid growth in the face of the 2008 recession changed the game. Most countries needed to slash interest rates to keep their economies afloat. The extremely low interest rates helped China grow even faster. It gobbled up commodities from resource-rich countries like Canada, Australia, Peru, Nigeria and Brazil. It couldn’t get metals, crops and fuels fast enough.

In turn, these countries borrowed heavily, counting on China’s continued expansion. They ramped up production. They invested in multi-billion dollar projects – oil sand fields, mines, natural gas production. They borrowed heavily.

Now the Chinese economy is slowing down and interest rates are rising. Because of growing debt, companies are forced to keep producing. Unfortunately, China’s appetite has diminished. The result is a glutted market.

To compound the problem, the multi-billion dollar projects are just getting off the ground. They were financially and politically expensive to start, and they’ll be just as expensive to stop. The flood of raw materials continues, and the “commodities hangover” might go on for years.

Considering the dramatic global impact of China’s slowdown, it’s no wonder that analysts are keeping a close eye on its futures market. Our data team has been working hard to release databases on the country’s four futures exchanges. The four bourses — the Dalian Commodities Exchange, the China Financial Futures Exchange, the Zhengzhou Commodities Exchange, and the Shanghai Futures Exchange — all rank in the top 20 derivatives exchanges in the world.

The four Chinese futures exchanges

Chinese futures markets are so large that what happens during Asian hours inevitably impacts prices in the US and Europe the next day. In 2013, night trading was introduced, allowing trading to be conducted at the same time as the New York and London exchanges. This development gave Chinese traders even more influence over global prices.

Here’s an overview of each Chinese futures database:

The Dalian Commodities Exchange (Quandl code: DCE)

According to the U.S. Futures Industry Association, China’s agricultural futures trading volume accounts for 58% of the global futures market — the highest of any country. The DCE is the only futures exchange in Northeast China, a relatively untapped market space. It lists 16 futures contracts that include soybeans, soybean oil, corn, palm oil, soymeal and petroleum products.

According to the Futures Industry Association, the bourse is the largest mainland futures exchange. It also has the deepest liquidity pool.

The China Financial Futures Exchange (Quandl code: CFFEX)

CFFEX is the only derivatives exchange in mainland China. According to the Financial Times, “China has moved cautiously to expand financial derivatives in recent years, wary of the role that such instruments played in the 2008 global financial crisis.” Last summer, when the markets crashed, the government intervened and restricted index future trading on CFFEX. It also tightened rules on futures trading.

At the beginning of this year, the government intervened again by introducing a circuit breaker mechanism to the exchange. The circuit breaker was meant to “stabilize the market” by stopping trading when stocks plummeted. Instead, it helped promote market crashes. On January 8th, it was suspended.

CFFEX lists index and bond futures. For select futures, the history goes back a decade.

Zhengzhou Commodities Exchange (Quandl code: ZCE)

Established in 1990, the Zhengzhou Commodities Exchange was the first experimental futures market approved by the State Council. In 1998, the government shut down over 40 exchanges which had emerged because of widespread price manipulation. The ZCE was one of the few national exchanges that survived.

ZCE started with forward contract trading. In 1993, it launched its first futures contracts on five agricultural products — wheat, corn, soybean, green bean and sesame. Since then, it has added other agricultural contracts, like white sugar and rapeseed oil.

The Shanghai Futures Exchange (Quandl code: SHFE)

SHFE has become one of the key price centers for the world’s metals trade, alongside the New York Mercantile Exchange’s Comex and the London Metals Exchange. Metals volumes on the SHFE have been on the rise for past few years. In April, two new contracts that were formerly only listed on London Metal Exchange — nickel and tin — were added to the SHFE.

The exchange lists contracts in steel, copper, aluminum, natural rubber, fuel oil, zinc and gold.

While this database is free, analysts who need professional-grade continuous contracts can find SHFE datasets on our premium Stevens Continuous Futures database (Quandl code: SCF).

To get free, unlimited access to our Chinese futures databases, sign up for a Quandl account.

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