Foreign Correspondence

[Amaunet]

China's gold market should transform in three aspects: official


UPDATED: 17:13, September 07, 2004


China's gold market should gradually experience transformations in three aspects: transformation from commodity trade to finance trade, from spot transactions to future transactions, from domestic market to international market, says Zhou Xiaochuan, President of People's Bank of China on Sept 6.

Zhou made the remarks at the annual meeting of the London Bullion Market Association. The London gold market is the largest market as well as the one with the longest history in the world. As the administrator of the gold market of London, the London Bullion Market Association will convene annual meeting in different cities around the world. This meeting has become one of the most important international meetings for the gold market.¡¡

China's gold market's function of investment and financing has not been fully exerted, because China exercises control over gold trade. How can the market transform from commodity trade to trade of finance products? Judging from the current situation, developing individual's investment in gold is a realistic option. Gold, both common commodity and money commodity is an effective instrument for inflation proof and risk evasion. Therefore it is practical to develop individual's purchase and sales of gold.

Zhou points that the transaction of gold needs to transform from spot transaction to that of gold derivatives. The spot transaction of gold is still the major transaction form at the Shanghai Gold Exchange, but as the market grows, the exchange will eventually offer various kinds of gold derivatives including forward transaction and futures. Under the premises of effective prevention of financial risk, the Central Bank will offer gold future products.

China's gold market is still relatively close, so China will further open up the market and quicken its steps toward getting integrated into the international market. China should actively create conditions so that its gold market becomes important component of international gold market.

From the perspective of the Central Bank, the development and improvement of the gold market will facilitate improvement of regulating instrument for monetary policy and macro control system. The establishment of China's gold market signifies the completion of constructing a market for major financial products in China, which comprise market of currency, security, insurance and foreign exchange. A complete finance market system will provide with more solid grounds for China's macro economic control.

By People's Daily Online


http://english.peopledaily.com.cn/200409/07/eng20040907_156229.html