Hong Kong to gain as China streamlines cross-border gold trade

PUBLISHED : Wednesday, 04 May, 2016, 7:16pm
UPDATED : Wednesday, 04 May, 2016, 9:58pm

Gold trading between Hong Kong and China is expected to rise with the People’s Bank of China announcing on Wednesday a rule change from June 1 to simplify cross-border shipment procedures that would help speed up gold imports into the country.

Companies that frequently import and export gold and gold products will be allowed to apply for a single permit that can be used for up to 12 shipments, the central bank said in a statement on its website.

China currently has only 15 authorised gold importers, including major banks such ICBC, which need to register every single shipment.

Gold traders said the rule change would benefit not just mainland Chinese gold importers but also Hong Kong gold traders that deal with mainland importers.

“Since mainland China is the largest gold producer and consumer worldwide, the simplification of rules will speed up imports and hence promote more cross-border trading,” said Gary Cheung, chief executive of Tung Shing Bullion (Brokers).

Cheung said gold is often imported from overseas into Hong Kong before being re-exported to mainland China, so gold dealers in the city would benefit from the easier shipment procedures.

“China has been very keen to promote the gold industry and the latest PBOC move would help its market develop further. This will also help in the internationalisation of the yuan by promoting more cross-border trading of gold,” Cheung said.

The PBOC statement said the trial to simplify the rules will take effect from June 1 and would apply to ports including Beijing, Shanghai, Guangzhou, Qingdao, Nanjing and Shenzhen.

Haywood Cheung, who is also permanent honorary president of the Chinese Gold and Silver Exchange Society, said China needs more such rule changes to increase its international influence in the gold market.

“China is already the largest consumer of gold. Its growing wealth is encouraging people to buy both gold jewellery and gold bars for investment. Hong Kong, which is an international financial centre used for trading by many international gold firms, has a role to play in this process,” he said.

The Hong Kong gold exchange has teamed up with ICBC to use its gold vault in Qianhai for Hong Kong gold jewellery manufacturers from September. For the longer term, it is planning to set up a gold vault in Qianhai two years later as a bonded warehouse to help Hong Kong jewellers with factories in Shenzhen.

The gold vault may shorten the transportation time for manufacturers while also deepen the links between Hong Kong and Qianhai gold markets.

Shanghai gold exchange last month started to introduce gold price fixing in yuan twice a day, which Haywood Cheung called an important move by China to increase its global influence.

“China is now the largest gold consumer but it has no influence on international gold price fixing mechanism, which is still concentrated in London. Shanghai gold fixing and the other reform plans in China will boost the country’s influence in the international gold market,” he said.