China is moving to gain more pricing power in the global gold market, allowing more banks to import the metal and starting an international board at the Shanghai Gold Exchange.
Shanghai Pudong Development Bank Co Ltd and China Merchants Bank Co Ltd said that they received approval earlier this month to import gold. Reuters had reported that Standard Chartered Plc has also been cleared for imports, although the bank declined to comment.
With these three, China would have 15 banks that may import gold.
According to the Shanghai Gold Exchange, the platform for all physical trade in China, SPD is among the top 10 trading members so far this year and CMB is among the top 20.
Meanwhile, the international board of the gold exchange, located in the China (Shanghai) Pilot Free Trade Zone, will start trading as early as September, an exchange source said. Although no official announcement has been made, “all parties involved have started preparing. Of course we hope the more participants the better”, said the source. More lenders get green light to import gold
The move will also help China establish a yuan-denominated gold pricing system, a note from CMB said.
“More participants mean more channels for gold trading, and international players may join in, deepening the China gold market’s integration into the global market,” said Yang Fei, a gold investment analyst in Shanghai.
The exchange plans to launch three physically backed gold contracts on the FTZ international board, which aims at becoming a price-discovery center.
Analysts and market insiders said all these moves will help China’s gold importers gain more pricing power in the global market.
According to statistics from the World Gold Council, China became the world’s largest gold buyer in 2013.
“A market’s pricing power depends on its activity and accessibility. The more players it involves, the more say it has,” said Albert Cheng, managing director for the Far East at the WGC.
At present, pricing power lies largely with the London Bullion Market Association.
Xu Luode, chairman of the exchange, said earlier this year that as the world’s biggest consumer and producer of gold, China should have its own pricing benchmark. The international board will support that goal.