The effects of Chinese factor on international commodity prices

The consumption of international natural resources caused by contradiction of Chinese domestic supply and demand is often referred to Chinese factor. This paper analyzes the effects of the difference of Chinese import and export for natural resources (metal goods) to international commodity prices based on the data between Jan, 1999 and Jun, 2008. Through the establishment of VAR model and co integration analysis, we found there is long-run equilibrium relationship between Chinese factor and the international commodity prices. When the demand increases, the international commodity prices also increase. This phenomenon is related to besides the contradiction between supply and demand of China, and is also related to the change of international capital and the cycle of resources production. Finally, it gives some recommendations for establishing the price immune system on natural resources for China.