China is expected to launch gold futures at its newly established
Shanghai Gold Exchange when conditions are ripe, which opened
Wednesday, said a top banking official.
The exchange, limited to spot transactions for the time being, will
begin trading in gold futures contingent upon improvements in the
current spot transactions, according to Dai Xianglong, governor of
the
People's Bank of China, the nation's central bank.
Dai said the futures trading will be part of the gold exchange's
plan to become a financial marketplace with a focus on the gold
investment business.
But Dai did not reveal a specific timetable, just saying: "The gold
exchange will open for futures transactions when the time is ripe
and when it is approved by the State Council.''
The official opening of the gold exchange Wednesday ended the
50-plus years of government monopoly over the gold market.
Since the founding of the People's Republic of China in 1949,
Chinese gold producers had sold all of their products to the
central bank, which had then allocated the precious metal to gold
processors.
The central bank will stop purchasing gold from producers in China
in the short term now that the Shanghai Gold Exchange, which has
signed up 108 Chinese trading members thus far, has opened. Members
include miners, jewellery makers, gold importers and exporters, and
commercial banks, according to a statement released by the gold
exchange.
These members are now permitted to conduct spot gold transactions,
and they are exempt from a 17 per cent value added tax.
The bank governor was the first to strike the bronze gong at the
Shanghai Gold Exchange, located in a European-style mansion on the
Bund, now Shanghai's prestigious financial street.
In
his speech, Dai said the opening of the exchange, on which silver
and platinum can also be traded, also marks the establishment of
all major financial product markets in China, following the opening
of currency, securities, insurance and foreign exchange
markets.
According to Shen Xiangrong, president of the gold exchange, the
gold price on the exchange, which closed at 83.55 yuan (US$10.10) a
gram Wednesday, will be the benchmark for the domestic gold
market.
"The price on the gold exchange will basically fluctuate in line
with changes on the world's gold markets, mainly London's,'' Shen
said.
Traders on the gold exchange clinched 98 deals involving a total
volume of 540 kilograms Wednesday.
The weekly quotation system for domestic gold prices, implemented
by the central bank from June last year, was automatically
cancelled after the launch of the gold exchange, said sources close
to the bank.
Hailing the opening as a tangible step towards liberalization of
the gold market in China, Albert Cheng, head of the World Gold
Council's operation in eastern Asia, told China Daily: "We
will see robust increases in gold demand because it will be much
easier to buy gold on the exchange than from the central bank, and
(we are likely to see a surge in) individual gold purchasing as an
investment, which is now a blank in China.''
The Gold Council, a non-profit organization established by major
gold miners in the world for the purpose of promoting the use of
gold, has predicted that annual gold demand in China will grow to
600 tons in the next few years. The council's statistics put demand
on the Chinese mainland at 213.2 tons last year.
(China
Daily October 31, 2002)