Governor of the People's Bank of China Dai Xianglong, said that the central bank has decided to scrap the planned system in the gold sector.

For decades, the central bank has been the sole decision maker regarding China's gold production and circulation. Gold producers have to sell all of their output to the central bank, which then resells it to gold users.

But Dai stopped short of putting a date to the establishment of an exchange or naming its location.

It is rumored that given the status of Shanghai as the leading financial centre on the Chinese mainland, it is almost certain that the city will be chosen to house the new exchange.

The launch of the exchange is likely to take place in the second half of this year.

According to industry observers, it is ideal timing for China to reform the regulatory framework of the gold sector as, while the country's gold reserves have been increasing, high prices on the international market are beginning to ebb.

The World Gold Council has said that they expect the launch of the exchange to significantly stimulate China's domestic gold demand.

A few years after deregulation, domestic demand for the precious metal is expected to increase to 500-600 tons annually from the current level of around 200 tons, Kerr Cruikshanks, corporate director of the World Gold Council (International Marketing), told China Daily recently.

According to media reports, China's gold output reached a record high of 175 tons last year.

The country is the world's fourth biggest gold producer.

(China Daily 04/28/2001)