China Deregulates Gold Trading

by Mary Swire, Tax-News.com, Hong Kong

05 August 2010

The People's Bank of China has published a guide announcing measures to open up the gold market in China.

The Central Bank said the gold market would be opened up in stages with the following moves:

• More commercial banks will be permitted to import and export gold;
• Foreign exchange trading restrictions will be relaxed for gold trading;
• Chinese banks will be permitted to hedge gold positions overseas;
• Overseas players may be allowed greater participation;
• Shanghai Gold Exchange and Shanghai Futures Exchange will be encouraged to play a greater role in the market; and
• The tax regime may be adjusted to facilitate trading and investment.

The initiatives were reported to be in response to increasing private demand in China, as domestic production is increasingly unable to satisfy domestic demand; China is the world’s leading producer of gold and also the second largest consumer after India.

The improvement in the range of gold-based financial products could reduce the need to increase physical imports. The government itself is not seen to be a gold investment enthusiast, holding less than 2% of its reserves in gold.

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