Chinese Fake Gold Loans Could Reach $15 Billion

Chinese gold processing firms have since 2012 used falsified gold transactions to borrow 94.4 billion yuan ($15.2 billion) from banks, the country’s chief auditor said.

Commodities such as copper, rubber, soybeans and bullion have commonly been used in China for financing, where traders or investors borrow against the commodity with the aim of investing the money in high-return areas such as real estate or shadow banking.

Most such deals are legitimate, but revelations of borrowing based on fake transactions in the gold market by the national auditor, which comes on the heels of alleged metals financing fraud at Qingdao Port, may prompt authorities to launch another crackdown on commodity financing.

Spot checks on 25 companies that process bullion, such as jewellers, showed they made a combined profit of more than 900 million yuan by using the bank loans to take advantage of the difference between onshore and offshore interest rates, as well the appreciation of the Chinese currency, according to a report published this week on the National Audit Office’s website.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza