Over the past three decades, China has driven and shaped demand for commodities worldwide as its phenomenal growth and unprecedented infrastructure boom has moved not only mountains of earth but global markets too.
That power to shape markets has continued despite a recent slowdown in growth. China’s demand for base metals and iron ore now comprises 40-60% of global demand while its import of crude oil in May notably exceeded US imports, two years after first overtaking them.
Today, however, a significant new trend is emerging as China becomes involved not just in buying commodities but in trading them too – and the company spearheading that movement believes the role of Chinese investors could rise strongly in the next five years.
BOCI was the first Chinese investment bank to identify the emerging demand and establish a commodities franchise in 2010 to cater to the growing client demand for commodities derivatives. Chinese participants now claim an impressive proportion of trading volume on the London Metal Exchange and other exchanges.
Headquartered in Hong Kong, BOCI has been a pioneer of the country’s financial internationalization and has established an industry-leading position through its expertise and global network of 55 subsidiaries and partnerships with financial institutions.
BOCI believes there is still potentially vast demand for global commodities bubbling from a latent and untapped investor base in China. BOCI is seizing the strategic opportunity to raise its profile in a previously under-represented sector for Chinese banks.
Tong Li, Chief Executive Officer of BOCI, said: “The centre of gravity for global commodities trading is moving decisively towards Asia. With our global ambition, BOCI is ideally positioned to provide comprehensive investment banking services to commodities participants worldwide.”
Although trading in metals, mining commodities and equities continue to be predominantly based in London, New York, and Chicago, more funding is flowing from Asia and a host of new trading products have become available to Asian investors.
|Arthur Fan, |
Global Head of
Arthur Fan, Global Head of BOCI Commodities, said: “Hopefully, over the next five years, we'll get to the next stage in our commodity business, which is to expand our products and our service capability so we can become a key player in the landscape.
Total solution platformBOCI has set a swift pace at the forefront of China’s shift towards global commodities trading, offering trading services for listed futures and options covering commodities including base metals, crude oil, refined oil products, precious metals, agricultural products, freight, coal and iron ore.
BOCI this year signed an agreement with future exchange operator CME Group to expand the use of China’s currency the renminbi outside the country’s borders, and it is in Europe that China’s growing appetite for commodities may be most keenly felt in the years ahead.
Now, BOCI is looking to expand its financing business for commodity clients, in repurchase agreements and for offtake and prepayments. In Europe, it will collaborate with Bank of China’s branches for synergy in introducing more products and better services to clients.
“In the coming years, we will start aggressively expanding our client base in Europe,” said Fan, who pointed out that a blend of Chinese and European professionals in his London team would seek to increase business with firms in Europe.
Meanwhile two other game-changing developments look likely to accelerate China’s movement into commodities trading: The internationalization of the renminbi which BOCI expects to continue in the future, and the huge infrastructure projects driven by China’s landmark Belt and Road initiative.
Tong Li, CEO of BOCI, said: “China’s Belt and Road initiative is creating enormous business opportunities throughout the world, particularly in commodities and related sectors. BOCI aims to provide a full suite of financing, trading and risk management solutions to commodities participants and facilitate business along the Belt and Road routes.”
These ambitious, economy-transforming ventures across central and south-east Asia will see Chinese companies buy commodities assets overseas and seek out tailored financing and hedging capabilities provided by financial institutions such as BOCI.