Hong Kong iMail 19/Jun/2002
Gold exchange to open next month
by Pamela Pun
China's long-awaited liberalisation of the tightly controlled gold market will kick off with the opening of the Shanghai Gold Exchange next month, an exchange official
said yesterday.
The exchange, China's first for gold, has been undergoing trial runs for the past seven months and ``will formally operate in July'', Yin Po was quoted by
International Financial News as saying yesterday.
The Central Government plans to open up the gold market to the world in three stages over five years, Li Zuoxiu, an official involved in drafting the plan, said.
The first two years would be a transitional period, during which authorities would adopt a two-tier mechanism for the market.
While the government would make its purchases as planned, producers would be allowed to sell their extra gold on the exchange as long as they met the
government's demand.
After the transition period, the People's Bank of China, or central bank, would cease buying from producers, who would sell all their gold on the exchange.
This would occur over a further three years.
The central bank would eventually pull out of the gold market operation, but remain as regulator.
After the five-year reform programme was over, the mainland's gold market would be ready to become a part of the global market, Li said.
The opening has been postponed more than once recently.
The issue of value-added tax on trading was the major reason for the delay, Yin said, adding that the issue ``had been solved in principle''.
Currently, spot deals were the major business of the gold exchange. Under Chinese regulations, trading of commodities is subject to a value-added tax of 17 per
cent.
The tax would increase trading costs such as for bullion transportation and the exchange's membership fee.
Trading on the exchange would be restricted to 108 members, which included 24 suppliers, 60 companies involved in the gold trade such as jewellers and three
banks.
A senior Industrial and Commercial Bank official said the lender would have two financial products for individual investors - paper gold and spot gold trade.
Currently, 96 per cent of gold production is used for making jewellery. |
