In an effort to curb the disorderly rise incommodity prices, Chinese regulators in May 23 summoned major businesses inindustries, including iron ore, steel, copper and aluminum, and demanded thatthey stop manipulating market prices, hoarding goods and jacking up prices.

They vowed to keep a close eye on commodityprice movements, and step up inspections on the commodity futures and spotmarkets.

They also pledged to implement "zerotolerance" on illegal activities, enforce monopoly agreements, and crackdown on spreading disinformation and hoarding in the industry.

Industry associations such as the ChinaIron and Steel Association and the China Nonferrous Metals Industry Associationalso attended the meeting.

Among the watchdogs were the NationalDevelopment and Reform Commission (NRDC), the State-owned Assets Supervisionand Administration Commission of the State Council and the State Administrationfor Market Regulation.

Chineseregulators warned commodity price manipulation

The NDRC, China’s national economicplanner, issued a press release on its website about the meeting on May 23.

It said the sustained sharp rise in somecommodity prices since the start of this year was the result of a combinationof factors, including international transmission and excessive speculation,which has disrupted the normal production and sales cycle.

Prices for 42 out of 50 major commoditiesrose over the April-to-May period, according to the Chinese National StatisticsBureau. Prices of steel and coal products surged over 10 percent on averagefrom April to May, on top of a nine-percent inflation in steel in the firstthree months of this year, data from China's Iron and Steel Association showed.

Boosted by the price surge in rawmaterials, China's producer price index, which measures costs for goods at thefactory gate, recorded a 6.8-percent yearly increase in April, exceeding marketpredictions.

The regulatory authorities demanded thatrelevant key enterprises take the lead in maintaining price order in thecommodity market. They should not collude with each other to manipulate marketprices, fabricate and spread rumors about price rises, or hoard goods for profiteeringand raise prices.

Key enterprises should move to promote thecoordinated development of upstream and downstream industries and keep theindustrial ecology healthy, the meeting said. The message caused domesticcommodity prices to plunge on May 24, with the main futures contract for ironore dropping more than 5 percent and rebar decreasing nearly 4 percent.

The shares of iron and steel-relatedcompanies traded in Shanghai and Shenzhen also dipped 1.73 percent on Monday,according to Shanghai-based information provider Wind Info.

For the next stage, authorities willclosely monitor the trend in commodity prices, strengthen regulation over theco-movement between the futures market and spot market of bulk commodities andadopt a zero-tolerance attitude on irregularities, according to the meeting.

It added that regulators will alsoresolutely investigate and punish illegal acts that result in theimplementation of monopoly agreements, in accordance with the law.

Enterprises and industry associations atthe meeting pledged to regulate production activities and operate in keepingwith the law to keep the market and prices stable.

Prices of various commodities, includingsteel, have surged since the beginning of the year. Deformed steel bars, forexample, were priced at CNY6,200 (USD964.1) per ton on May 13, surpassing theall-time record seen in 2008, and up from CNY5,200 per ton in late April.

In an effort to curb excessive price hikes,officials of the NDRC and the SAMR went to Hebei province, China’s steelproduction base, on May 12 to study the situation.

Since May 14, the black commodities, led byiron ore, have fallen across the board, with steel prices pulling back to earlyMay levels. And on May 19, the State Council, China’s cabinet, called forcurbing unreasonable rise in commodity prices and preventing the increases frombeing passed on to consumers.

Chinatakes multi-pronged measures to maintain steady economy

Facing commodity price hikes, China vowedto take measures to ensure the supply of commodities, curb unreasonable priceincreases and prevent transmission to consumer prices at the State Council'sExecutive Meeting chaired by Premier Li Keqiang on May 20.

The meeting called for careful analysis ofreasons for the recent spate of rapid commodity prices increases and adoptingmeasures in a targeted and holistic approach to ensure the supply ofcommodities and keep their prices stable.

Since the beginning of this year, due tomultiple factors especially the transmission of global price rise, somecommodities have seen extended price rally, with the prices of some varietieshitting new records.

The government must take very seriously theadverse impact caused by the price hike, and take both holistic and focusedmeasures in light of market dynamics to exercise precision regulation, so as toensure the supply of commodities and curb unreasonable price increases andprevent transmission to consumer price.

"We must carefully analyze the reasonsbehind this round of rapid increase in commodity prices and focus on the cruxof the issue, to adopt measures in a targeted and holistic approach," Lisaid.

A host of steps was decided includingraising export tariffs on certain iron and steel products, temporarilyexempting tariffs on pig iron and scrap steel, and canceling export tax rebatesfor some steel products, to increase supply in the domestic market.

Dedicated efforts will be made to advancestructural adjustments and discourage projects with high energy consumption.

The country's rich coal resources will befurther tapped. Key coal companies will be encouraged to raise production andsupply while ensuring safety, and the capacity of wind, solar, hydro andnuclear power will be increased to ensure energy supply during summer peaktime.

Opening-up will be pushed forward, tore-calibrate the import, export and buffer reserves of commodities, facilitatecustom clearance and better leverage international and domestic markets andresources, to more effectively ensure supply and keep prices stable.

Market regulation will be strengthened.Industry associations should play their due role in enhancing industryself-discipline. The regulation of futures and spot markets will be bettercoordinated and targeted measures will be taken when appropriate to screenabnormal transactions and malicious speculations. Irregularities such as makingand executing monopoly deals, spreading false information, price gouging andhoarding will be dealt with to the full extent of the law and brought to light.

"While the market continues to play adecisive role in resources allocation to ensure the supply of commodities andkeep their prices stable, the government must better fulfill its responsibility.Any monopoly and hoarding will be cracked down upon under the law to step upmarket regulation," Li said.

Efforts will be made to maintain thestability of monetary policy and keep the RMB exchange rate broadly stable atan adaptive, balanced level, to guide market expectations as appropriate.

Assistance will be provided to help marketentities, especially micro and small businesses and self-employed individuals,cope with rising costs and other difficulties in their production andoperation.

Policies to provide tax relief for microand small enterprises and individually-owned businesses and refund all due VATcredits to advanced manufacturing enterprises on a monthly basis will beeffectively implemented, and procedures for such concessional tax policiesstreamlined.

Direct-benefit monetary policy tools willbe well executed. Re-lending and rediscounting will be scaled up to underpininclusive finance. Policies to incentivize reductions in the guarantee fees offinancing for micro and small enterprises will be well exercised, to encouragebanks to issue more credit-based loans.

"Policies for tax and fee cuts andinclusive finance will be refined, and assistance to market entities indifficulty scaled up. All the temporary support policies must be fully delivered,to safeguard the lawful rights and interests of micro and small firms andself-employed individuals," Li said.