China has taken a definitive step towards the internationalization of its raw materials markets: this month has opened foreign investors its lithium futures contract on the Guangzhou Futures Exchange (GFEX). This measure comes after similar openings in iron ore and oil, and is part of the Chinese Government’s ambition to strengthen your influence on global prices of raw materials and expand the international use of the renminbi (RMB).
Futures are contracts that set today the price at which a commodity will be bought or sold at a future date, regardless of what its market price is at that moment. This contract is not an anecdotal movement. In the last year, the GFEX has traded 120 million lots of lithium carbonate, an essential material in lithium-iron-phosphate batteries (LFP) that equip a good part of current electric vehicles.
China processes around 60% of the world’s lithium and it is by far the largest battery market on the planet. In this context, its physical weight in the supply chain is undeniable. However, converting that industrial weight into real financial power is much more complicated. Chinese capital controls mean that the vast majority of futures trading, despite its enormous liquidity, is domestic in nature. It is primarily domestic speculators and not global commercial participants who set these prices.
A recurring speculative fever
Volatility is the first obstacle. Last year the closure of a CATL mine was enough to unleash a real speculative fever in the GFEX contract. In fact, on July 6, 2025, the daily volume fell to 174,787 lots, just 35% of the annual average, an example of how quickly interest deflates once the initial frenzy passes.
This stock exchange has had to intervene on several occasions to stop similar episodes. In July 2025 he imposed a daily limit of 3,000 lots in new positions for those who were not members of a futures society. In November he went further: he tightened commissions and position limits, and prices plummeted immediately. The clearest precedent dates back to 2016, when Chinese retail money poured so heavily into steel rod futures that the volume traded in a single day exceeded the negotiated total on the Shanghai Stock Exchange.
China opened its crude oil contract on the Shanghai International Energy Exchange using this same rhetoric in 2018
Another important note: adding to this regulatory volatility is the problem of financial plumbing. Foreign operators can now deposit margins in dollars, but with a 5% discountso only $95 out of every $100 counts as collateral. All trading and settlement is still done in RMB, and repatriating those profits is not easy.
China opened its crude oil contract in the Shanghai International Energy Exchange (INE, for its acronym in English) using this same rhetoric in 2018. And although achieved considerable foreign participationcompanies still have to simultaneously manage price risk, RMB/USD exchange rate risk and capital repatriation risk; three exposures that on the New York Mercantile Exchange (NYMEX) or the Intercontinental Exchange (ICE) would be reduced to one.
The result is that as long as these futures remain subject to political intervention and capital controls, they will predictably continue to function as an essential reference for the market, but not as the authentic benchmark against which the rest of the world can manage its risk.
Image | freepik
More information | Volt Insight
GIPHY App Key not set. Please check settings