Reuters reported that China battling inflation has vowed to crackdown on speculation, hoarding and price gouging.
Reuters reported that China battling inflation has vowed to crackdown on speculation, hoarding and price gouging. Here's a look at some of the actions it has taken to keep a lid on commodity prices in the last two months.
1. Monetary policy
The People Bank of China raised interest rates by 25 basis points on Christmas Day, the second hike in just over two months. It last raised rates in October and also increased banks' required reserve ratios three times in the past month to drain liquidity from the market.
2. Action on commodity trading exchanges
The government said last week that it will maintain its crackdown on price speculation in 2011, focusing on cotton, edible oils, grains and vegetables.
China three main commodity exchanges in Shanghai, Dalian and Zhengzhou have raised trading margins to force traders to back their positions with more cash. They also widened trading bands, allowing prices to fluctuate more without hitting the headline-grabbing up or down limits.
One newspaper report said the three exchanges are also considering raising the lot size of their futures contracts to curb speculation. Sugar and cotton dealers said the authorities also threatened to close trading in certain agricultural commodity contracts if there was excessive price speculation.
