China Push For Gold Pricing Power Continues, Grant 3 New Import Licences

Three more banks have been permitted to import gold to China, as IBTimes notes, the country redoubles its efforts to attain pricing power of the commodity. The move, which brings the number of firms allowed to import gold into China to 15, comes ahead of the SGE launching its Yuan settled bullion exchange, in hopes of replacing the now discredited London Fix and become a price-discovery center. Shanghai Pudong Development Bank and China Merchants Bank were joined by Standard Chartered - only the 3rd foreign bank to be allowed to import gold into China as the nation continues to increase the pace of liberalisation of the gold market following the approval last year of the country's first gold-backed WTFs.

 

As Reuters reports,

China has allowed three more banks, including a foreign lender, to import gold, sources with direct knowledge of the matter said, as the world's top gold buyer gears up for its strongest effort yet to gain pricing power of the metal.

 

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Standard Chartered, Shanghai Pudong Development Bank and China Merchants Bank were given regulatory approval recently to import gold, five sources with direct knowledge of the matter told Reuters.

 

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China approached foreign banks, gold producers and refiners to participate in SGE's international bourse, sources told Reuters earlier in the year, to boost its position as a price-discovery centre for gold. It plans to launch three physically-backed gold contracts.

 

The chairman of the exchange said in June that China should have its own pricing benchmark as it is the biggest consumer and producer of gold.

 

"The new import licenses seem to be well-timed. Along with their upcoming new exchange, they are clearly showing that they want to make the market more accessible, and easier for foreign players," said one precious metals trader in Hong Kong.

As IBTimes continues,

The news comes as Shanghai's international bullion exchange is on the verge of launching – a flagship initiative in China's attempts to wrest gold pricing power away from London.

Currently, the setting of the gold benchmark is determined twice daily on the London bullion market by Barclays, HSBC, ScotiaMocatta (the bullion banking division of Scotiabank), and Société Générale. China – along with Singapore – has been looking for ways to muscle in on the so-called 'gold fix'.

Opening the import market to three additional banks – Standard Chartered, Shanghai Pudong Development Bank, and China Merchants Bank – shows the Chinese government is willing to show some flexibility in order to do so.

The decision to permit a foreign lender is even more significant and, along with the fast-developing Shanghai Special Economic Zone, demonstrates the ongoing liberalisation of China's banking and commodity networks.

With the country's decision to permit gold-backed exchange-traded funds last year, as well as extending gold trading hours, its ambition of becoming a price discovery centre is growing closer.

Standard Chartered becomes just the third foreign bank after HSBC and ANZ to be permitted to import gold to China.

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Of course, as we noted before, the timing of this liberalization also coincides with the collapse of the CCFD ponzi system and perhaps enables gold promises to be met more efficiently.

 

China's apetite for physical gold, which is further shown below focusing just on 2012 and 2013, has been estimated by Goldman to amount to over $70 billion in bilateral trade between just Hong Kong and China alone.