home Latest News Expanding Cross-Border Commodities Investment into China – JD Supra (press release)

Expanding Cross-Border Commodities Investment into China – JD Supra (press release)

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Reed Smith

Reed Smith’s Singapore office recently hosted a seminar on the Singapore-China commodities nexus. In the seminar, we highlighted the current trend of commodity market participants increasing their commodity exposure in China either by expanding the scope of their current business there or by establishing a presence for trading activities in the domestic market. The seminar discussed some of the key legal issues relevant to anyone considering such increased investment in China.

The importance of China to the global economy is today undeniable. Just as many countries in the world are increasingly looking towards national interests, China is looking to strategically reposition itself as a global leader in international trade. Among those, of the most strategic significance are possibly, Singapore and Hong Kong.

The importance of China to the global economy is today undeniable. Just as many countries in the world are increasingly looking towards national interests, China is looking to strategically reposition itself as a global leader in international trade. Among those, of the most strategic significance are possibly, Singapore and Hong Kong.

As of the latest official government statistics (2015), China’s contribution by way of investment into Singapore (SGD20.78 billion in 2015) remained below that of India, Malaysia, Japan and Hong Kong, individually. The US was the largest investor into Singapore. In contrast, when viewed from the prism of Singaporean outbound investment, China was its number one destination for investment with SGD121.1 billion invested in 2015. Its investment into China has progressively increased each year between 2011 – 2015.

This trend of further investment into China from Singapore is likely to continue. As the largest consumer of commodities, China’s trade in raw materials is not new. However, there is now a greater interest in the price of such raw materials being determined by prices established inside China, rather than outside. This is leading to an increased range of and sophistication in the commodity products and tools available to establish prices within China or, at the very least, countries that share time-zones with China. With such increased sophistication, the nature of the interest for commodity market participants, many of whom use Singapore or Hong Kong as their hub for commodity activities in Asia, is also increasing.

Recognising this trend of increasingly sophisticated investment in the commodity sector into China, and the similar interest for Chinese commodity players to establish trading hubs for their operations outside of China, our seminar discussed the key legal issues on this topic with a panel comprising lawyers from our Beijing, Shanghai, Hong Kong and Singapore offices.