China Opening Gold Link to H.K. as It Seeks Price Influence

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China’s opening more of its gold market to Hong Kong investors, the latest step in its campaign to influence the price of bullion globally and expand use of the renminbi beyond its borders.

Members of the Hong Kong-based Chinese Gold & Silver Exchange Society will be able to use offshore yuan to buy and sell the precious metal on the Shanghai Gold Exchange when trade starts at 8 p.m. local time on Friday, according to Liu Liang, a spokesman for the exchange. Bullion of 99.99 percent purity on the bourse was little changed at 232.66 yuan a gram ($1,165.31 an ounce) at 3:02 p.m.

The world’s largest gold consumer is widening access for non-mainland investors to exert more influence over prices and boost the yuan’s global use. Last year, China listed gold contracts in Shanghai’s free-trade zone, allowing limited trading by foreign investors. The nation is also taking steps to be more involved in the London gold market and is trying to start a yuan-based fix this year.

“China wants to attract more foreign investors to trade gold here, but the yuan’s not freely convertible and the capital account isn’t open, so money can’t flow in and out smoothly,” said Duan Shihua, a partner at Shanghai Leading Investment Management Co. “The Shanghai gold price hasn’t attracted a lot of interest from outside of China and yet to reach the significance as its counterparts in London or in New York.”

The daily turnover of the benchmark Shanghai free trade zone contract averaged 9,634 kilograms in May, compared with 26,513 kilograms on the main Shanghai board, according to exchange data. That’s dwarfed by the 490,455 kilograms -- 17.3 million ounces -- that changes hands daily in London.

The Shanghai Gold Exchange is in discussions with the CME Group Inc. about listing each other’s contracts. The bourse is also in talks with Dubai Gold & Commodities Exchange to introduce yuan-denominated gold products in Dubai.

China set up the Shanghai Gold Exchange in 2002 and overtook India as the world’s biggest bullion buyer in 2013.

(The timing of the trade link’s opening was corrected in the first and second paragraphs of an earlier version of this story.)

— With assistance by Feiwen Rong

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