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Sex, drugs and 200,000 tonnes of Copper
posted Monday, 21 November 2005
People go missing in China all the time, a fact that has often been bemoaned by relatives and human rights groups alike, but few cases have sparked such keen international interest as that of Chinese commodities trader Liu Qibing. A man who, at first, didn’t exist. Then did exist, but outside of the system, and who is now rumored to be the scapegoat for a Chinese plot to manipulate the price of copper that went disastrously wrong, and which ended up costing the Chinese Government several hundred million dollars.
According to sources within the London Metal Exchange, Liu, a metals trader with 10 years market experience, vanished shortly after a particularly risky, but potentially lucrative, trade went wrong.
Liu is reported to have sold copper that he did not own at today’s prices on behalf of the Chinese State. Gambling that, by the time that he would have to make delivery, prices would have fallen; allowing him to buy copper in at the lower price in order to fulfil his supply commitments, and to make a substantial profit.
Unfortunately for Liu, rather than going down, uncertainties over supply pushed prices up to a record high of $4,132 per tonne. An eventuality that has left China with little choice but to buy copper in at the higher price to fill the order.
Liu's tactic, known as 'selling short', would have netted Beijing a substantial profit if prices had fallen, but is instead thought to have lost the Chinese government in the up to $US800 Million.
Liu Who?
When questioned about Liu and his trading, officials at China's State Reserve Bureau, a government controlled body, initially denied Liu's existence, saying that that neither was Liu a trader with the SRB, nor was the SRB aware of the existence of anybody of that name.
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"We don't have anyone on staff named Liu Qibing" Spokesperson, State Reserves Bureau, China |
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This denial came despite the fact that Liu is a well know figure within the trading industry, who had personally worked with traders from the western London Metal Exchange, on behalf of the Chinese state, on numerous occasions.
Conspiracy?
Soon after news of Liu's loss making traders, and his subsequent disappearance, became public knowledge; the SRB altered its story. Later admitting that they were aware of Liu's existence, but stating that he had been operating without authorization when he made the damaging trades.
Analyses with the metal and futures trades however have reacted with skepticism to Beijing's claims, stating the belief that Liu was operating with the full knowledge of Chinese regulators.
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"There is no way he was acting on his own" Futures Trader, Shanghai |
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In direct contradiction to assertions by Beijing, that Liu was taking risky trades without authorization, elements within the futures industry have voiced an alternative version of events. That Liu was not only working under direct orders from state officials, but that he was working as part of a larger, state sanctioned, plan to short sell on the copper futures market. A plan that may encompass a number of state owned or controlled interests, including the SRB and the Chinese metals interest Minmetals. With traders and industry sources voicing that Liu is being made the scapegoat by Beijing, and that blame is being apportioned to him in order to shield those higher up who set the policies to which Liu was working.
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"He was the one doing the trading, but I doubt he was actually taking the decisions." Futures Trader, Shanghai |
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Accusations, that it would be highly unlikely that Liu was acting alone, or without state sanction, are backed up by a number factors inherent in China's tightly regulated trading industry. Including the fact that Liu would have had to have been personally vetted and cleared to trade in commodities by the Chinese Securities Regulatory Commission before he could interact with overseas interests. That he would have required direct written permission from Commission officials in order to make such high level trades on the futures market, and that, in order to trade large quantities of copper, and that Liu would have been required to provide substantial proof of his ability to supply the copper that he was trading, proof that would not have been easy to forge, or to obtain if he was acting unilaterally.
Missing Presumed .... Missing
Liu's current whereabouts remain unknown and there are suspicions that he may either have absconded; fearing retribution from Chinese authorities, or that he may have been detained in secret prior to trial on state motivated charges, most likely relating to corruption or the accusation that he was operating without authority.
Some observers have also voiced the concern that Liu may have committed suicide in order to protect his family from state retribution, or speculated that he may have been executed. Though no credible information exists to confirm either of these suppositions.
According to sources within China's State Reserves Bureau, Liu is currently on leave.
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