There are many products in China's futures market. All these while, the main trading mode has been formed mainly on several trading contracts on selected months. This allow the flexibility of capital trading and industry players to manage on their position, and the adjusting the non-main contract through the spot base difference.

The Federal Reserve withdrew its economy stimulus policy, where increase of interest inevitably led to the appreciation of US dollar. At the same time, China's domestic economic situation is under restructuring exercise, where it experiences some challenges in overall macroeconomic situation. On top of this, the China-US trade war increases China's export pressure, as although the depreciation of the RMB encourage more export, but the government does not want its currency to devalue too fast, where we can see that the government's central bank is taking measure when its USD-RMB rate dropped to the psychological level of RMB7 recently.

The depreciation of the RMB exchange rate is unfavorable to the import for China. The moderate easing of monetary policy will increase the bullish sentiment of the commodity market, and the import of palm oil is based mainly on the futures-physical spread margin, depending also on whether importer lock-in their forex rate. We also see that the Ringgit's exchange rate is also on devaluation trend, as from the trade point of view, FOB price changes will have ultimate impact on the overall import cost.

In order to reduce the supply gap, China's official media said the import of soybean could be reduced by 10 million MT by lowering the feed protein content and importing more sunflower seeds, rapeseed and palm kernel meal. Although traders doubt about this measure, they realized that policy intervention might be higher than economic adjustment. To China's domestic soybean production, the government is also guiding some of the corn planting area to change to soybean planting. While this is restricted by the available arable land, so if it cannot effectively improve the yield, the overall room of improvement is limited. It is expected that China's soybean sown area reached 8.47 million hectares in 2018, an increase of 8.8% compared with the previous year. According to the trend of yield, the soybean production in China will reach 15.8 million MT this year, 1.25 million MT more than the previous year, and the increase has limited impact in solving the demand gap. The market is also discussing the possibility of developing soybean acreage by China in Russia, which involves inter-country issues with greater policy uncertainty and persistence in doubt. In the first half of the year, China showed a better PME import profit, a large increase in the volume of shipping, similar to the 2014 situation. The main import enterprises for China are PetroChina and individual traders, where shipments coming in mainly in Jul-Sep period, import volume of about 700,000-750,000 MT. Since RMB has depreciated from RMB6.3/USD during the period when the earlier shipments were booked to more than 6.8, there is a higher risk of losing on the exchange rate. In the near future, PME also gives better profits, but it is subject to the PME physical characteristics. In the summer, PME is mainly used in large machinery and barges in the southern region which required large volume of diesel, and demand will slow down in later part of the year to the weather condition. It is expected that the import of PME in China is about 800,000 MT in the whole year of 2018. In long run, PME imports are more dependent on import profit and market behaviour, restricted by the regional and seasonal demand, and it is difficult to form a steady and sustainable demand in the short term. The trend of crude oil price also adds a lot of uncertainty. In terms of government policy formulation, the government needs to consider the influence of trade relations among countries more.