23 July 2019

POLICY WATCH: Putting a new shine on gold trade

China is on course to surpass India as the world’s largest gold consumer as Beijing prepares to ease the rules for firms to import and export gold and also make it easier for individuals to buy the yellow metal.

The central bank plans to allow more Chinese firms to import and export gold and will also ease restrictions on individual buyers of the precious metal, according to a draft policy document issued on Sept. 30.

Under the proposed rules, banks members of the Shanghai Gold Exchange, the nation’s largest bullion market, are allowed to apply for import and export licenses. Also, gold producers with an annual output of over 10 metric tons are qualified for the license.

At present, only nine banks, mainly state-owned lenders including Bank of China, Industrial and Commercial Bank of China, China Construction Bank and Agriculture Bank of China, are allowed to import and export gold. The upcoming new rule will open the door to more participants. The Shanghai Gold Exchange has 25 bank or financial institution members.

However, the benchmark of 10-ton annual gold output means only a handful of big Chinese gold producers like Zijin Mining Group (02899.HK) and Zhaojin Mining Industry (01818.HK) will be eligible for the trade. Also, they are required to have a registered capital of at least 200 million yuan and overseas investment of over US$30 million, according to the draft rules.

All transactions will need to be registered with the exchange, and licensed companies are responsible for keeping domestic supply and demand in balance, the document said. And the central bank would continue to apply a quota for gold import, according to the draft rules.

Under the proposed policy, individuals will be allowed to bring in up to 200 grams (seven ounces) of gold into China from overseas without having to report to customs or pay tax. They are currently required to make customs declaration for taking over 50 grams of gold into China.

The move is set to benefit gold jewelry retailers such as Chow Tai Fook Jewelry Group (01929.HK) of Hong Kong, which is one of the top destinations for mainland shoppers who seek price discounts and higher purity. Gold jewelry products have a price discount of 30 to 40 yuan per gram in the city. That’s why mainland tourists flocked to the city to snap up gold jewelry in April this year, when gold price hit a multi-year low.

China’s gold imports via Hong Kong reached a record high 834.5 million metric tons last year, official data showed. The former British colony is the world’s third largest gold trading center after London and New York.

China’s total gold consumption this year may jump by 29 percent to reach 1,000 tons, overtaking India to become the world’s largest gold consumer, according to the World Gold Council.

– Contact the reporter at [email protected]



Freelance journalist

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