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SOEs may cancel "bad" commodity derivatives contracts

Chinese businesses are famous for their tendency to  renegotiate contracts after they’ve been signed. Today, it seems that Chinese state-owned enterprises that got burned dabbling in commodity derivatives are planning to unilaterally refuse to honor the contracts and refuse to pay the difference. The State Asset Supervision and Administration Commission said as much to six foreign banks, and global commodity markets reacted negatively to the prospect of massive Chinese defaults on gold and soybeans futures, among others. This is not what most would call acting like a responsible stakeholder in the global financial system, but Beijing is presumably exhausted by getting stuck on the losing end of so many commodity deals.  Beijing is also mildly irritated with Moscow. Last month Russian police raided a large wholesale market and confiscated some US$5 billion of goods imported by Chinese traders that lacked proper customs clearance, arresting many and deporting those who protested. Yesterday, Song Yongfu, director of the European Affairs bureau of the Ministry of Commerce, said China will work with Russia to restrict the "gray customs clearance" system that allows goods to be illegally imported into Russia – and then confiscated by whimsical police raids.

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