China's top bank warns investors to stop buying commodities derivatives

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China's top governing bank warned global investors to stop financial derivatives, stepping up a bid to curb risks amid the rising volatility in the market.

Investors who speculate in currency, gold or other commodity futures are set to pay the same fixed price as those who bet that property prices will never fall, said Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission.

Speculation in derivatives by ordinary people'is that often amounts to disguised gambling, and their economic failure of losses is preordained on Thursday at the Lujiazui forum in Shanghai.

With global commodities declining in numbers, Chinese government officials are trying to temper prices and reduce some of the speculative froth. Wary of inflating asset bubbles, the People's Bank of China has also been curtailing the circulation of money to the economy from last year, however gradually to avoid derailing growth.

The largest banks in China, including the Industrial and Commercial Bank of China Ltd. Bank of Communications Co. and Bank of China Ltd. have suspended the opening of new positions in products linked to commodities such as crude oil, natural gas and soybeans for individuals since April last year in a bid to protect clients against volatile commodities.

The move came after a Bank of China product linked to oil increased to $1.13bn losses for clients after falling below zero. Official figures show there are approximately 1.88 billion yuan in outstanding in commodity-related investment vehicles, making up less than 0.01% of China's wealth product market.

During the pandemic, Guo defended China's macroeconomic response to the crisis. Criticism that it amounts to an inadequate contribution to global growth is based on 'prejudice or misunderstanding, Guo said. The policies helped maintain economic growth and avert a deeper global recession, and its stable export prices serve as an 'anchor' to global inflation, he said.

While financial instability has subsided in China in many areas, Guo called for'relentless' efforts to contain threats.

Several banking loans to small businesses are anticipated to turn negative and can easily rebound, and different forms of 'ponzi schemes' disguised as financial technology or internet finance keep emerging, he told the forum.

Pan Gongsheng, Head of State Administration of Foreign Exchange, warned companies at the conference that such betting are doomed to lose.

More stories like this are available on bloomberg.com.

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