Preliminary Research On The Opening Policy Of Chinese Gold Market

It has been two years since the foundation of Shanghai Gold Exchange on 30 October 2002. Chinese gold market has made great progress in the quite short period in the following aspects: market size has been expanded remarkably, the investment proportion has increased rapidly, the pricing mechanism has been set up gradually, various investment items have been available, the number of the market entrant has been bigger, and the market has been operating stably and normally. However, it needs us to pay great efforts to improve the investment function of Shanghai Gold Exchange so further to make Chinese gold market become one of the important parts of the global integrated gold market. Having analyzed the policy of national gold administration since liberation, we can clearly know that the central government has done the reform in gold management system gradually such as pricing mechanism, system of supply and demand, licensing system of gold decoration goods and so on. And it is from the sales to the manufacturing and processing, while the sales are starting from the retails. In accordance with the course of China's entry of the WTO and reform of national foreign exchange administration system, as well as the progress of the reform of gold management system and the possibility of Chinese RMB converting to foreign currency, Chinese government will implement the policy of opening the import of the gold articles step by step, then to open the policy of gold import, so as to cancel the limitation to gold import and export, allow qualified banks home and abroad to enter Chinese gold market, therefore form a gold market system with the perfect market mechanism and proper supervision. It provides a new instrument for Chinese People's Bank to open the gold market to operate the currency policy. By purchasing or selling gold in the gold market, China's Central Bank is able to adjust the structure and number of international reserves, thus to control the supply and demand of currency. Meanwhile China's Central Bank should actively take the responsibility of supervising and administrating the gold market, transform its role gradually. Presently we should continue to perform the restraint of gold foreign trade, train the professional brokers, so to open the gold market all-round stage by stage. Since the foundation of Shanghai Gold Exchange, gold enterprises have undergone a market with a myriad of changes in the twinkling of an eye. The market with the opening-up and competitive environment will definitely put forward the new requirement to the enterprises in manufacturing, operating and management. The gold enterprises are required to have not only fairly good capability of quick response, but capability of powerful operation of marketing. The enterprises should begin with the following problems: improving the quality of products, laying much stress on the talent training, improve the quality of employees, attach great importance to crisis management of price. Becoming acquainted with the market, know the market, further to operate the market, all these are the basic requirement for Chinese gold enterprises to meet urgently. Gold enterprises in China should be clear to the current situation, grasp the opportunity and meet the challenge. Similar to one of the functions of preserve currency, gold can maintain and add the value. The foundation of gold exchange enables citizens to invest via a new channel to avoid the investment risk. The savings of mainland China inhabitants are presently as high as 1,200 billion RMB. Introducing individual gold investment and converting the money capital to gold capital, can broaden the channel to turn the savings to investment, and also adjust the supply and demand of currency at the macro-level, while at the micro-level by storing gold by people themselves, it can improve the social welfare, moreover benefit both the country and the people. The setting-up of Shanghai Gold Exchange is the necessity of opening gold market in China and adjusting gold domestic supply and demand by law of value and law of market, as well as meeting the demand of the development of commodity economy. It can balance the supply and demand of gold and allocate gold resources appropriately to develop the gold market. It can meet the requirement of gearing the international market to open the gold market. Nowadays Shanghai Gold Exchange focuses on over-the-counter deal of firm gold. With the grown-up of Chinese gold market, we will expand our business to various gold and golden products including deferred futures stage by stage.Shanghai Gold Exchange has respectively released T+5 and deferred delivery in February and August 2004. It can help enterprises lock the cost and maintain the value to some degree, elude the risk caused by the uncertainty of manufacturing cost, which is effected by the price changes. Now the deferred delivery is conducted by the initial payment, it can be dealt in advance, on time or deferred, which is up to the seller and the buyer. The price should be same to the matching one of the very day of deal. For one thing, this business offers the opportunity for gold manufacturing enterprises and gold consuming enterprises to hedge. For another thing, it offers the investor a diversified investment instrument and enriches the market of the gold deal. Based on it, the People's Bank of China will deliver the business of gold deferred and futures gradually provided that the financial risk could be avoided effectively. At present Chinese gold market is comparatively blocked. For the dealers is limited to domestic gold manufacturing and consuming enterprises, as well as commercial bank. The second reason is that gold can not be imported or exported unrestricted. The last reason is that we can not make deals with international dealers 24 hours a day real time. We shall readjust and strengthen the open-up of gold market, put great efforts in solving the mentioned problems, mend our pace to be in line with the international gold market, and do every means to create favorable conditions for Chinese gold market to become one of the most important parts of the international market. China is both a large gold-consuming and a large gold-manufacturing country. Compared with mature market in foreign countries, we should quicken the development of the market, develop the consciousness of products, and enhance the fame of brands. Meanwhile, we should try to attract more banks to join the market. On condition that there were no sufficient entrants, the market would be lack of liquidity, and then the price might deviate from its real value. Also the market entrants would take more risk so their enthusiasm would be hindered and the market would become vicious cycle. As we all know, the overseas well-done gold exchange pay much attention to its own control to market risks, which is the guarantee of credit and character. Rome was not built in one day, this capability is required to be developed by continuous innovation of...