Are the Chinese Hoarding Commodities For Financing?

Yves Smith highlights  that Michael Pettis claims China is importing excess copper because (somehow) it allows cash-strapped businesses to access financing.  He also speculates that they might be doing the same thing with soybeans:

As much as it may sound barmy to stockpile commodities to obtain better terms on financing, Michael Pettis claims that’s one of the factors behind what looks to be unduly aggressive purchases of copper by the Chinese. An excerpt from his latest newsletter, courtesy Michael Shedlock:

China had been importing for many months far more copper than was needed for real use…. Imports continued even when London prices exceeded Shanghai prices by more than the equivalent of China’s value-added tax.

Instead of being shipped to end users, it seems that copper was being stockpiled in warehouses.　 Why?　 One possibility of course was pure speculation…

It turns out, that the copper purchases were not entirely, or even mainly, speculative.　 They were part of a financing scheme for companies that….were having trouble accessing bank credit.　

Credit-starved companies were importing copper because they could obtain trade finance or some other sort of foreign financing, and then used the physical copper (or warehouse receipts, I guess) as collateral for domestic borrowing.　 The financing was continually rolled over.　 Buying copper was just a way to borrow for companies that needed loans and were otherwise unable to get them.

As I mentioned two weeks ago, when I discussed this in February with a senior executive in a major commodities company, he responded by saying that he thought the same thing might also be happening in soya…

I don't understand this at all, but if they cut back purchases, we might get some really nasty price drops, especially if this wet weather continues and the market gets concerned about acres switching from corn to beans at the end of the month.