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China eyes gold market clout with new exchange

China must have a bigger influence on the global gold market being the top consumer of the precious metal, the head of state-backed Shanghai Gold Exchange (SGE) said, as the country targets establishing its own pricing benchmark. "We should have gold fixing, pricing done in China itself," SGE chairman Xu Luode told an industry conference in Singapore on Wednesday.

"We need to use SGE's international board to implement opening up of the gold market. We need to build China's influence in the global gold market," Xu said. China, along with exchanges in Singapore and Hong Kong, are launching gold contracts this year in a bid to tap a market looking for a viable alternative to the metal's global benchmark that is under regulatory scrutiny.

Xu said the Chinese government and regulatory agencies are supporting SGE's plan for an international exchange in the free trade zone, adding that it will eventually be merged with the main SGE exchange. SGE has received good interest from foreign banks on their participation in the new international exchange, he said at the conference organised by the London Bullion Market Association.

Swiss precious metals refiner Metalor Technologies SA told Reuters on Tuesday that it will join the international bullion exchange in Shanghai. SGE is targeting launching the new exchange in late September and wants the pricing benchmark to be denominated in yuan, a source familiar with the matter told Reuters.

The price benchmark for gold is the so-called London 'fix', determined by a group of four banks over a teleconference. The process was under scrutiny recently after regulators in Europe and the United States began investigating benchmarks in several markets following the Libor manipulation case in 2012. A "China fix" will not be immediate, the source said, adding the exchange will be the first step towards a fix. The new international exchange will have a gold vault with storage capacity of 1,000 tonnes.

Copyright Reuters, 2014


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Banking Review 2014

Foreign Debt $61.805bn
Per Cap Income $1,386
GDP Growth 4.14%
Average CPI 8.6%
Trade Balance $-1.795 bln
Exports $1.995 bln
Imports $3.790 bln
WeeklyMay 28, 2015
Reserves $17.494 bln