Gold Vault Opens in Shanghai Free-Trade Zone

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Nov. 11 (Bloomberg) –- Bloomberg’s Stephen Engle reports on a new private gold vault opening in Shanghai’s Free-Trade Zone which will accommodate China’s growing appetite for gold. He speaks on Bloomberg Television’s “First Up.” (Source: Bloomberg)

Counterparts in singapore and hong kong and will accommodate china's growing appetite for gold and takes advantage of the city's new freed trade zone.

Behind not one security door, but two, three, four, five -- i lost count -- is what's believed to be china's largest private gold vault.

In total can hold up to 2,000 metric tons, double china's projected consumption this year.

Inside a rather nondescript warehouse and marketed at least privately to potential clients to the beat of michael jackson.

The free trade zone basically gold comes here is not considered inputted to china.

So in this regard gold can be stored here and exported out or then imported.

So there's no tax free eegs.

What kind of demand?

A big demand from the foreign banks.

We're talking to a few.

Again, the reason is a step forward for them because it's -- puts less limits.

This vault can be used as a trade hub basically so foreign banks can trade with domestic banks within this facility, which means saving costs and time.

They predict china's demand of gold will increase making china the world's biggest consumer of gold.

And they need to park it somewhere.

Like behind this four-ton door.

They like gold, they like the physical gold.

They don't like the paper gold.

We're going to see more gold coming into china.

For all the talk of possible transformational reforms coming out of the third plenum, chinese leaders don't like the bing bang approach.

They like to set up free trade zones or special economic zones like shenzhen where the economic rules on this side are different from this side.

China's trying a number of experiments.

The leadership doesn't want to bet the ranch until it's tried it and seen it work somewhere.

It seems like a smart way to do it.

But if it works, it can happen fast.

Yes.

But how fast is too fast for vested interest here?

Sure, capital control shielded china fairly well from the financial crisis but the economy today is more than 8 times larger than it was in 97. china's economic model is distorted in favor of state driven investment to the detriment of the consumer and private sector.

Cheap capital.

Financial repression it's called.

And that needs to be loosened up and i think they know it because it leads to mall investment, it leads to corruption.

When resources get allocated just because someone can touch it as it goes by, you don't get resources -- financial resources flowing in the right direction.

That's the battle between those wanting more openness and those afraid of giving up absolute control.

This text has been automatically generated. It may not be 100% accurate.

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