Officials in China have moved to cool a commodities trading frenzy that has seen the prices of some raw materials rise sharply in recent weeks. In the absence of any fundamentals, commodities like steel have risen more than 50% in the first 4 months of the year while iron ore has gained a third in just two weeks.

The country’s largest exchanges, the Shanghai Futures Exchange, Dalian Commodity Exchange and Zhengzhou Commodities Exchange, have curbed activity by raising the cost of trading, increasing margin requirements and imposing daily limits on certain contracts.

“The surge in speculation has arisen out of the government’s efforts to inject liquidity into the markets to prop up the currency and to ease the effects of the stock market rout that accompanied the new year as a wave of uncertainty over the future path for US interest rates spooked investors,” explained Conrad Buthazar, chief Asian markets strategist at Shinsei Corporate Management.

Close to half of the world’s most traded commodities derivatives are traded on China’s exchanges reflecting the shift in pricing power from West to East after China the years its economic growth miracle saw it become the world’s largest importer of every important commodity.

The surge in credit engineered by policymakers spurred a pick-up in construction and presented new ways for investors to bet on the Chinese economy after Beijing clamped down on the excessive margin trading in the country’s equity market.

That inadvertently led to $5 trillion being wiped off the value of mainland Chinese stocks in the summer of last year.

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