The Shanghai Gold Exchange is poised to get the jump on other mainland equity and commodity trading bourses by launching a gold trading platform in the city's free-trade zone open to foreign investors.
Rules on the gold exchange's "international board" are being reviewed by the central bank and the foreign exchange regulator, and an imminent approval is expected, according to exchange officials.
The platform, likely to get under way in the second half of this year, will mark a major breakthrough in the development of the free-trade zone, the mainland's first free port.
The trading platform and the warehouse will be run separately from the existing trading system in Shanghai's downtown Huangpu district, and the products will be denominated in yuan, part of Beijing's efforts to internationalise the currency.
Spot and forward gold trading will be conducted on the "international board" as analysts foresee a keen interest from foreign traders.
Foreign players will be invited to conduct gold trading, with liberalisation in the sector seen as creating arbitrage opportunities for them.
"Gold will be an ideal trading product to spearhead the efforts to internationalise all kinds of exchanges in the free-trade zone," said Jiang Shu, a gold analyst at Industrial Bank. "The precious metal could trigger a large turnover when the international players come."
Jiang, who has seen the draft rule, said domestic individual investors would not be allowed access to the platform initially.
The central bank and the foreign exchange regulator were expected to grant an investment quota to overseas players for gold trading in the zone, he added.
The Shanghai Gold Exchange will soon register a subsidiary, International Gold Trade Centre, in the trade zone to operate the new trading system.
Foreign institutions and individuals could open accounts in the zone that are designated for gold trading.
China became the world's largest gold consumer last year, overtaking India, after large falls in global prices prompted bargain hunting across the country.
Domestic gold consumption reached 1,176.4 tonnes last year, up 41.4 per cent from 2012.
The country produced 428.1 tonnes of gold last year, remaining the top gold producer for a seventh consecutive year.
Shanghai launched the free-trade zone in September last year under Premier Li Keqiang's plans to use the 28.78-square-kilometre territory as a test bed for further economic reforms.
Beijing has promised to make the yuan convertible under the capital account in the zone but has yet to give the go-ahead on this step to institutions and individuals based in the zone.
A liberalised capital account could let foreign investors trade yuan-denominated equities, financial futures and commodity futures - all of which are now off-limits to them. But financial regulators remain concerned over the prospect of a surge in hot money inflows prompted by a fully convertible yuan.
The Shanghai Futures Exchange set up a 5 billion yuan (HK$6.3 billion) subsidiary, Shanghai International Energy Exchange, in the free-trade zone in November last year. Yuan-denominated crude oil futures will be traded on the exchange.
Foreign investors will be allowed to participate in crude oil futures trading as the mainland strives to gain pricing power on the key energy product.
But sources said it would be some time before the regulators finalised a detailed trading framework.
Rosneft pushes for Transneft share issue to fund eastern pipeline expansion
Feb 19 (Reuters) - Russian state energy company Rosneft is pushing the government for approval on a share issue for Transneft so the pipeline monopoly can finance the expansion of routes to the east, including China.
Rosneft, led by an ally of President Vladimir Putin, plans to triple oil flows to China in the coming years and has been at odds with Transneft over who pays for expanding the East Siberia-Pacific Ocean (ESPO) pipeline and its spur to China.
A spokeswoman for Deputy Prime Minister Arkady Dvorkovich said on Wednesday that Rosneft's CEO, Igor Sechin, had made the proposal for government to issue more shares and Prime Minister Dmitry Medvedev had passed it on for consideration.
"There is such an order (for the government to assess Sechin's proposal)," she said, adding that Dvorkovich did not support the idea himself.
Rosneft and Transneft declined to comment. A source with Rosneft confirmed that the company has sent such a proposal to the government but did not give any details.
Sechin often lobbies government directly to make decisions in favour of his company, which has grown into the world's top listed oil company by output since it was formed in 1993.
Russia, and Rosneft in particular, are ramping up oil supplies to Asia, with China outstripping Germany as Moscow's largest buyer of oil. Pipeline shipments totalled about 1.949 million tonnes in January and Rosneft plans to build a large petrochemical plant in Russia's Far East.
Transneft, headed by Nikolai Tokarev, usually uses money raised from oil and oil product shipping tariffs to finance new pipeline construction. In some cases, oil companies build new pipelines themselves when Transneft refuses to get involved.
Tokarev told reporters on Tuesday that Transneft plans to spend almost 2 trillion roubles ($56 billion) in total on investments by 2020, including the ESPO expansion.
Russia wants to more than double ESPO capacity to 80 million tonnes a year (1.6 million barrels per day) by 2020. ($1 = 35.4676 Russian roubles) (Additional reporting by Denis Pinchuk and Olesya Astakhova; Writing by Katya Golubkova; Editing by Elizabeth Piper and Louise Ireland)
ESPO crude recipients China, Singapore, Thailand and South Korea know exactly how this all plays out. They've all recently set up Physical Gold exchanges!!
Artificial conflict, the engineering of forces opposing each other, Hegel's thesis-antithesis-synthesis model of getting things done has long been the preferred modus operandi of the ruling elite and its institutions. Everything changes....except this unsavoury truth.
PETRODOLLAR ALERT: Putin Prepares To Announce "Holy Grail" Gas Deal With China.