China to open nickel and lithium futures trading to foreign investors

China will allow foreigners to invest in domestic nickel and lithium futures, part of Beijing’s efforts to boost its influence in global commodities markets. 

Nickel and lithium carbonate are among 14 futures and options products that will be opened up, the China Securities Regulatory Commission said in a statement on Friday. Exchanges would be urged to make preparations to implement the changes, it said, without providing any start dates. 

 

China is the world’s largest buyer of raw materials, but benchmark prices are mainly set in financial centers like London, Singapore and New York. Beijing wants more sway over prices, and the move also dovetails with its goal of burnishing the yuan’s appeal as a global currency.

 

Nickel futures are traded on the Shanghai Futures Exchange and lithium carbonate on the Guangzhou Futures Exchange. They are are among the most-active domestic commodities contracts and are of critical global importance given their importance for batteries and the energy transition.

 

“It’s a significant move,” said Tiger Shi, a managing partner at brokerage BANDS Financial Ltd. It’s likely that other metals like copper, aluminum and zinc, will also become available to foreign investors due to the SHFE’s global push, he said.

 

The Shanghai exchange unveiled an internationalisation plan last May, which included a proposal to allow overseas investors to post foreign exchange as collateral for yuan-denominated trades. Restrictions on overseas capital are an oft-cited reason for China’s failure to play more of a role in global markets.

 

Allowing foreign investment in futures will help boost China’s commodity pricing power, improve risk management of non-ferrous metals, and promote better nickel price discovery, SHFE said in a statement on Friday.

 

China’s earlier moves to open up commodities futures have had only limited results. Shanghai International Energy Exchange, a unit of SHFE, has offered yuan-denominated copper contracts to overseas investors since 2020, and crude oil contract since 2018, but neither has made much of a dent in the dominance of international bourses. The Dalian Commodity Exchange let foreigners invest in iron ore futures in 2018, a move that’s had a bit more success.