Insiders: Guest Watching Copper Trade Finance
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August 08 10:11:26, 2025
In early May, the State Administration of Foreign Exchange (SAFE) issued a notice titled "Notice on Strengthening the Management of Foreign Exchange Fund Inflows." This move aimed to enhance oversight over bank settlement and foreign exchange sales limits, as well as to tighten control over the foreign exchange transactions of import and export companies. The initiative was primarily targeted at curbing the inflow of hot money and other abnormal cross-border capital flows.
Since the announcement, various forms of trade financing—such as copper financing—have drawn increased media attention. According to reports, many domestic banks have tightened their lending policies since late May, making it more challenging for some copper trading companies to import goods and issue necessary documents. This has significantly impacted their daily operations.
Industry experts believe that the actual risks involved in copper trade financing are manageable, and both the government and financial institutions should approach these businesses with a rational and balanced perspective.
Zhang Shuijin, Secretary General of the Chamber of Commerce, highlighted during a seminar on copper trade financing hosted by the Shanghai Chamber of Commerce and the Metals and Metals Trade Association that the copper trade sector differs greatly from the steel trade in terms of market maturity. He pointed out that the credit chain in the copper industry is highly developed, with relatively low financing costs and stable overall profits. Companies typically engage in price preservation after importing, which helps eliminate price risk.
A representative from Yanyin Metal Trading Co. noted that over 90% of copper trading firms participate in hedging. Some foreign banks even require full hedging as a condition for granting loans. Importers are particularly sensitive to the price gap between domestic and international markets, and if the situation becomes unfavorable, they can resort to entrepot trade as a final safeguard.
Cha Jihong, General Manager of Zhongrong Huixin Futures Co., Ltd., explained that electrolysis copper import companies often maintain value through the futures market, and banks adjust loan amounts based on the company’s asset value. He argued that the decline in copper prices has little impact on these enterprises.
According to a bank employee, no trader has been found to carry significant loan risk so far. “Copper trade loans are still considered a safe business. The recent tightening is due to regulatory requirements,†he said.
Cha Jihong also warned against overreacting to isolated cases of risk exposure. “While industry self-regulation and supervision are essential, broad monetary tightening could harm the entire sector, potentially increasing price volatility and creating new, uncontrollable risks.â€
Another executive from a non-ferrous metal import company in Shanghai added, “If only domestic trade financing is banned, it would effectively give an advantage to foreign investors.†Zhang Shuijin echoed this sentiment, suggesting that false trade activities should be strictly regulated, while real imports and limited entrepot trade should receive strong support. “The risk lies not in the financing itself, but in how it is used.â€