China launched a gold exchange open to foreign players for the first time on Thursday, putting the world’s top bullion buyer on track to win a race to set the benchmark price in Asia.
The launch of the Shanghai Gold Exchange’s international bourse with yuan-denominated contracts is the first in a slew of bullion contracts expected in Asia, including Singapore and Hong Kong, before the end of the year as the region aims to have pricing power as the top consumer of the metal.
China’s efforts have the best chance of success, say market players, as it has a huge home market. With imports of over 1,000 tonnes of gold last year and local production of about 400 tonnes, China consumes over a third of global supply.
A successful take-up of the exchange could see gold priced and paid for in yuan rather than the U.S. dollar, challenging the traditional dominance of London and New York in trading.
The exchange’s launch is also a big boost for the free trade zone, where the bourse is located. Despite being touted as a test bed for financial reforms, the zone has struggled to show significant progress in its first year.
“The launch of the gold contracts will increase China’s influence and improve price discovery,” China central bank governor Zhou Xiaochuan said at a launch event in Shanghai.