And finance professionals

Commodity trade Finance feels the pinch

As developed economies struggle, many see China as a relative bright spot. There is a tendency, however, to underestimate the challenges China faces in the coming years, particularly the risks posed by its heavy reliance on exports and the continued growth of global trade.

While China might be able to shield itself from the worst effects of financial crises elsewhere, it is far more deeply integrated with the international trade system. A significant slowdown in global trade would be a major setback for “the world’s factory.” What can China do to safeguard its economic growth from the ill effects of a slowdown in world trade?

One obvious way would be to promote use of its currency, the RMB, in international trade finance. Trade financing offers one of the most promising avenues for internationalising the RMB, as well as for building China’s influence within the international financial system.

It’s worth recalling that when the 2007-08 global financial crisis hit, the impact on China's foreign trade at first seemed relatively light. As banks affected by the crisis grew increasingly reluctant to provide trade credit, however, Chinese foreign trade started to feel the pinch, which had a knock-on effect on the real economy. China’s trade-focused sectors experienced great losses, with the contribution of trade to GDP moving from positive to negative territory. Massive government stimulus measures enabled the Chinese economy to weather the storm better than most. But this relative success masked the ongoing vulnerability of China’s reliance on foreign trade.

Since a tight trade credit environment is likely to persist in the future, Chinese banks should begin making more credit in its own currency available to both domestic and overseas enterprises engaged in foreign trade – borrowing in RMB, they should also be required to repay in RMB.

Since China, like the US, controls the printing and issuance of its own currency, Chinese banks that lend in RMB could afford in times of crisis to adopt a highly liberal, risk-seeking approach, backed by adequate guarantees of liquidity from the PBOC.

Such an approach would be welcomed by a global business community hungry for credit, whilst also accelerating and broadening the internationalisation of the RMB.

With greater circulation and acceptance of RMB overseas, the currency could be used in trade with commodity-exporting countries like Brazil or Australia, both important suppliers of raw materials so crucial to sustaining China’s – and global - economic growth.

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Cap and trade. Right.

by experience_counts2

Old news but worth repeating because the politicians keep talking this shit. Remember dotcoms? Remember weekly refinancing for 125% of home equity? Meet the next game called cap and trade. $7B USD magically disappears and no one is accountable.
Flying below the American radar, a tax scandal has been rocking the global carbon markets. Ironically, it is emanating from Copenhagen, the city that six months ago hosted the world's largest climate summit

Aluminium prices hit beer can costs

The soaring cost of making beer cans has forced the London-listed SABMiller on to the back foot in its long-running US price war with Anheuser-Busch, the company behind America's most popular beer, Budweiser.
Aluminium prices have almost doubled in the last year to about $3,000 (£1,586) a tonne, mirroring other commodity price rises. SABMiller, which brews the number-two US beer, Miller, admitted that, unlike some rivals, it had not hedged against this rising cost and would not start doing so at current aluminium price levels.Miller sales to the US drinks trade dropped 1%, with operating profit down 7%

Unctad Commodity Yearbook, 1990: United Nations Conference on Trade and Development : Geneva/Sales No. E.90.Ii.D.9
Book (United Nations Pubns)

Commodity finance being done by Trading Houses  — Spend Matters
And banks fund these companies through trade lines, just like they fund so many hedge funds, factors, and others now interested in trade receivables. See – Shadow Banking Market grows and grows and Commodity Trade Finance – Still the Banks' Domain.

Unctad Commodity Yearbook 1991/Sales No B.91.Ii.D.9
Book (United Nations Pubns)
Unctad Commodity Yearbook 1992/Cnuced Annuaire Des Produits De Base 1992/Sales No. E/R.92.Ii.D.8
Book (United Nations Pubns)
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