China’s quest for pricing power: Financial hierarchy, autonomy and commodity futures markets

Commodities are crucial for understanding China’s economic rise but financial aspects of commodity markets are often neglected in existing debates. However, commodity prices are increasingly determined through trading in futures markets. Historically, most commodity benchmarks were traded on futures exchanges in New York, Chicago and London (infrastructure), dominated by Anglo-American financial institutions (investor), USD-denominated (currency), and supervised by US/UK regulators (regulatory). The article develops the concept of (commodity) pricing power as resulting from a combination of these different sources of power which further solidifies US financial hegemony, while putting China into a subordinate position. It thus provides a novel perspective for understanding the politics of commodities, global finance and China’s role therein. Based on policy documents, financial data and 200 expert interviews, the paper explores China’s efforts for establishing its own commodity benchmarks, tracing how (a lack of) commodity pricing power emerged as a problem for Chinese authorities and was subsequently pursued as a national development strategy for gaining more autonomy from US-dominated markets. While we often perceive China as a powerful actor, the paper illustrates how the market-based, financialised setup of international economic affairs can fundamentally constrain China’s global influence, even placing it into a position of profound vulnerability.