China, which is all set to surpass the gold buying phenomenon that is India as the world's top gold consumer this year, is keen to further open up its domestic market for the precious metal to the international community, with Shanghai looking at gold exchange-traded funds (ETF) as the market matures.
Hoping to tap resilient Chinese demand for bullion as gold prices head for their twelfth straight year of gains, the Shanghai Gold Exchange (SGE) also said it would launch an interbank market early next month.
As the domestic market matures and opens up, the exchange will launch over-the-counter trading, gold ETFs, Friday night trading and improve the leasing market, SGE Chairman and President Wang Zhe told a precious metals industry conference in Hong Kong on Monday.
The gold ETFs will be traded on the Shanghai and Shenzhen stock exchanges, said Zheng Zhiguang, general manager at Industrial and Commercial Bank of China Ltd.
There is no doubt that gold ETF products will be launched in China. It's entered a study phase on regulation and operation, Zheng said on the sidelines of the event.
It will begin as a domestic market, but with future development it can become a global market, he said, adding some of the gold investment products that the bank offers would be linked to ETFs in the future.
But immediate focus is on the launch of an interbank market that will start with spot contracts and gradually offer forward contracts.
All banks trading on the China Foreign Exchange Trading System and National International Funding Centre will eventually be able to trade in the market, including foreign banks, Wang said.
In the beginning it will pilot with Chinese banks and eventually be open to all, Wang told Reuters.
Currently near three-week highs above $1,730 an ounce, spot gold has gained nearly 11 percent this year, its safe-haven appeal boosted by a shaky global economy.
INTEGRATE WITH GLOBAL MARKET
China's gold market is expanding because of strong domestic demand for the metal, said Xie Duo, g eneral director of the financial market department of the P e ople's Bank of China.
The central bank's policy is to encourage residents to hold physical gold, he said, but declined to comment on the PBOC's own gold buying activity.
Later on, we will further open up the market and quicken the steps to integrate into the international market, said Xie, without providing details.
We should actively create conditions for the gold market to become integrated