July 18, 2012
China Aims to Become Major Gold Trading Center
Shanghai, China has proposed to broaden trading of precious metals in its local market, according to a person involved with the matter, a move that could increase liquidity and help Beijing gain stronger pricing power for key commodities like gold.
Already the world's largest gold consumer and producer, China has long been hoping to become the next major gold trading center after London and New York, but Beijing's tight grip on commodities trading and rigid capital controls are among the obstacles in the way.
The move is also part of the broader financial reforms that Beijing has launched in recent weeks, loosening some of the restrictions on securities investment and allowing banks to price loans at cheaper rates than in the past, that seek to grant market forces a bigger role in both the economy and the capital market.
The moved proposed by market officials would expand trading of precious metals from designated exchanges to the country's vast interbank market, according to the person involved.
The Shanghai Gold Exchange has released draft rules for such interbank precious metals trading, which will include spot, forward and swap contracts for the commodities, said the person.
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