China will allow over-the-counter gold trading between banks for the first time Monday, a significant financial reform for the world’s second-largest buyer of the precious metal.
The move reflects the Chinese government’s latest effort to develop Shanghai into a major gold trading center, and mirrors similar developments in the country’s currency and oil markets.
The introduction of interbank trading is intended to develop China into a liquid and market such as London, and demonstrates the government’s readiness to open the market to greater participation by international banks, said Jeremy East, global head of metals trading at Standard Chartered PLC STAN.LN +0.89%(STAN.LN).
“From a government perspective, gold is seen as currency, and the government is slowly releasing the controls on currency. We expect the [gold] market will be opened up to more foreign banks,” he said.