SHANGHAI (AFP) - China, one of the world's biggest gold consumers, on Thursday launched a new market for trading the precious metal, state media said, as it seeks to attract foreign investors to a year-old free trade zone (FTZ).
The Shanghai Gold Exchange launched an international board in the city's FTZ in hopes that it might eventually challenge global gold markets like New York and London, the official Xinhua news agency reported.
The move came just ahead of the one year anniversary of the founding of the zone and days after authorities removed a top official running it amid media reports he was under investigation for corruption.
When China launched the FTZ last September, officials promised widespread reform including free convertibility of the yuan currency, but the slow pace of change has frustrated businesses, especially foreign companies.
Chinese Premier Li Keqiang toured the FTZ on Thursday, Shanghai authorities said, a visit viewed as a central government show of support for the pilot project.
The international board will trade spot gold among members, including foreign financial institutions, Xinhua and industry officials said.
The existing Shanghai Gold Exchange, opened in 2002, includes only a handful of foreign members, making it largely closed to overseas investors.
"The international board has made China's opening up of the gold market a reality," exchange chairman Xu Luode was quoted by Xinhua as saying.
An exchange spokesman, Gu Wenshuo, declined to give details.
Industry officials said contracts on the international board will be denominated in China's yuan, but overseas investors will be able to settle with offshore yuan funds as the government seeks to make the currency more widely used.
The market will also allow gold from overseas to be warehoused in the FTZ and used for physical delivery of the metal, they said.
"Opening up this international board allows more international participants, who would like to participate in the China market," said Albert Cheng, Far East managing director for the World Gold Council.
"This is the ambition of the Shanghai Gold Exchange, to further open up the market to global players - either suppliers or investors," he told AFP.
Mainland China's consumer demand for gold was the second biggest in the world in the second quarter of this year at 192.5 tonnes, behind only India, and accounting for around a quarter of global demand, according the World Gold Council.
The exchange set the price for a new benchmark contract, iAu99.5, at 245.28 yuan (S$50.57) per gram before the start of trade, according to a statement.
The international gold price was at US$1,223.58 (S$1,529.84) an ounce (28 grams) on Thursday afternoon.