Launch of a national gold exchange, the first step toward
long-awaited gold market deregulations, is just a matter of time,
say experts, but where the market will be located has raised a stir
of debate.
Four cities - Shanghai, Beijing, Tianjin and Shenzhen - are vying
to host the gold exchange.
The launch of a national exchange, which is expected to help gold
producers seek hedging and improve gold circulation, has become an
urgent task for the government.
But as of yet the State Council has not announced an accurate
timetable and programme for the new exchange.
The national gold exchange should be established in a city which
has flourishing gold transactions and financial activities,
convenient transportation and successful experience of market
operation, said Liu Shijin, director of the Industrial Economy
Research Department of the State Council-affiliated Development
Research Center.
From this perspective, Shanghai, China's largest economic
powerhouse, appears to be the most favourable host.
Gold consumption in eastern China with Shanghai as the center
amounted to 50 tons in 1999, one-fourth of the country's total.
Shanghai is also the country's largest gold jewelry market.
In
whatever city is chosen, the gold transactions would require
sufficient financial assistance, Liu said.
"Commercial banks, with advantages in capital, trade network,
talent, management and information, can play an essential role in
promoting gold circulation and should be allowed to conduct gold
transactions," Liu said.
However, the People's Bank of China, the central bank, currently
tightly controls the national gold production and circulation.
The Shanghai municipal government plans to build the city, home to
many commercial banks, into a world financial center in the 10th
Five-Year Plan (2001-05).
The world's five gold exchanges are all located in financial
centers -London, New York, Zurich, Tokyo and the Hong Kong Special
Administration Region.
The country's first silver exchange opened in Shanghai at the
Huatong Nonferrous Metal Wholesale Market, which is widely seen as
part of Chinese authorities efforts to liberalize the sliver market
and pave the way for a gold exchange.
The silver market liberalization is the prelude to the gold market,
said Zhang Changjie, president of Huatong market.
"The smooth operation of the silver exchange is expected to provide
helpful experience for the future gold exchange," Zhang said.
The Huatong market is in full preparation, he said, adding he is
confident the market could be chosen to operate the gold
exchange.
According to international practice, silver and gold are traded at
same exchange.
During the past eleven months, China's silver exchange trade volume
exceeded 800 tons and was valued at more than 800 million yuan
(US$96.4 million).
The volume per week has increased to 25 tons from 7 tons in the
exchange's initial stage.
Zhang predicted that the silver exchange's trade volume per year
will account for two-thirds of the country's total silver output
with further improvement of its operation.
Currently, there are 56 trade members authorized to conduct spot
silver transactions using the renminbi currency at the silver
exchange.
Silver prices on the exchange, which fluctuate in line with changes
on the international silver market, has functioned as benchmark for
the domestic market.
(China Daily 11/5/2000)