Established rivals may keep Shanghai trade zone's gold exchange in check
China is the world's biggest user of the precious metal but establishing a world-leading market will likely need a heavy investment in time
China's launch of an international gold exchange in the Shanghai Free-Trade Zone 11 days ahead of schedule last week, may not be much help as it seeks to compete with established gold markets such as New York, London or Singapore.
Gold traders believe the gold market in the FTZ would attract domestic and foreign investors to trade, but catching up with the major international players will not come quickly.
"There would be a lot of demand for gold trading in the new market,' said Andrew Fung, executive director of Hang Seng Bank, with traders keenly interested in arbitrage opportunities between Hong Kong and Shanghai to make money.
"But it would take a long time for Shanghai to catch with other international big players such as New York, London or Singapore as these markets are long established. In addition, the yuan is not yet fully convertible which makes it hard for the Shanghai gold market to become international. It may, however, be able to fight for a role in Asia," Fung said.
Ben Kwong Man-bun, a director of KGI Asia, said the Shanghai international gold exchange would attract mainland and international investors.