With the opening of China's first gold exchange,
Shanghai is poised to be a major international gold trading center, industrial analysts said here recently.
The opening of the
Shanghai Gold Exchange recently marks the deregulation of the gold market in the country after over half a century of government monopoly, said Cheng Binghai, deputy head of the China Gold Council.
China's status as the world's fifth largest gold producer and third largest consumer, combined with Shanghai's developed credit system and financial market, enabled the municipality likely to achieve its new ambition, Cheng said.
There are currently more than 40 major gold markets worldwide, with London, New York, Chicago, Zurich and
Hong Kong as the top five markets. Most of the gold markets are now situated in international or regional financial centers instead of being located in gold production belts.
For a city to be turned into an international gold trading center, it must have a developed commodity economy and credit system, a sophisticated financial market, stable political environment, as well as sound transportation, communications and warehouse facilities and a good legal system, Cheng noted.
As long ago as the 1930s and 1940s,
Shanghai was already a renowned financial center in the Far East and the largest gold trading center in the region.
More than half a century later,
Shanghai is now well on its way to recovering its status as China's financial center and an international financial center.
The municipality is already home to interbank and foreign currency markets, the interbank bond market, the silver and jewelry markets, as well as securities and futures markets.
Shanghai's edge as a major hub of capital and other production factors and its strong storage capacity and developed communications and transportation facilities mean that the metropolis possesses the major essential conditions to become an international gold trading center, Cheng said.
Industrial sources predict that nearly 30 percent of Asia's annual 2,200 tons of gold trading volume will be done in
Shanghai in the years ahead.
Though this figure is still small in comparison with the trading volume in the London gold market, analysts said that the figure at the
Shanghai Gold Exchange will increase rapidly with China's expected removal of restrictions on the import and export of gold.
Albert Cheng, the World Gold Council's East-Asia regional director, said he believes that
Shanghai will emerge as the gold trading center of Southeast Asia and maybe even all of Asia within just a short period of time.
All the top five gold markets enjoy free exchange rates and cross-border gold trading. In this regard,
Shanghai is a regional market only.
But after China's entry into the World Trade Organization, the Reminbi (RMB) is also likely to become an international currency and maintain a stable value in the long term, the sources said. It is also highly possible that China will become a major receiver of international capital in the next 20 years.
Xi Jianhua, a research fellow with the
Shanghai branch of the Bank of China, said if all the predictions come to true,
Shanghai is very likely to become the world's sixth largest gold market.
