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Beijing (AFP) Aug 4, 2010 China has moved to further free up the nation's gold market by allowing more commercial banks to import and export the precious metal, as rising prices for bullion and tumbling stock markets spur demand. Liberalising the gold market will "help improve the competitiveness of financial markets" and "help expand investment channels to meet domestic investor needs," the People's Bank of China said in a statement issued Tuesday. The announcement helped push gold spot prices higher. In Hong Kong the precious metal opened higher at 1,191.00-1,192.00 US dollars an ounce, up from Tuesday's close of 1,182.50-1,183.50 dollars. China is the world's top gold producer and number two consumer after India. It allows the big four state-owned banks -- Bank of China, Industrial and Commercial Bank of China, Agricultural Bank and Construction Bank -- to trade gold bars. It is unclear whether any other banks are also allowed to trade the precious metal. Policymakers also said they would consider allowing qualified foreign bullion suppliers to provide the metal to the Shanghai Gold Exchange and might allow them to trade gold in the Shanghai market. China has the world's sixth largest gold stockpile at 1,054 tonnes, according to the World Gold Council. The central bank statement, issued jointly with five other departments, said there was a need to improve the foreign exchange policy for the gold market, push forward its opening-up to foreigners and provide financing services. Domestic demand for gold has increased by an average 13 percent per year in the past five years, and is set to double over the next decade, the World Gold Council said in March. China's rapid economic growth -- it expanded 10.3 percent in the second quarter of 2010 -- and burgeoning middle class are driving demand, with jewellery accounting for nearly 80 percent of gold consumed, the council said. The central bank said China would "actively push forward the building of infrastructure for gold trading and reserves to fend off disasters" as well as improving storage and transportation systems and settlement services. It also suggested changes in taxes on bullion investment could be in the offing, but did not provide any details.
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