Skilled trader sets gold stan­dard

The fu­ture is shin­ing bright for Hong Kong’s one and only cer­ti­fi­fied phys­i­cal bul­lion trade plat­form, thanks to main­land routes. Chai Hua re­ports.

China Daily (Canada) - - HONG KONG -

There is no doubt that the in­ter­na­tional cen­ter of gold trade will trans­fer from West­ern to Eastern coun­tries in the near fu­ture.”

The Chi­nese Gold and Sil­ver Ex­change So­ci­ety ( CGSE), a 106-year-old bul­lion plat­form and the only one in Hong Kong au­tho­rized to trade in phys­i­cal gold and sil­ver, is ex­plor­ing new busi­ness op­por­tu­ni­ties across the bor­der on the Chi­nese main­land.

Founded in 1910, the CGSE is the only gold and sil­ver ex­change rec­og­nized by the Hong Kong gov­ern­ment and one of the world’s top five gold trad­ing plat­forms.

“There is no doubt that the in­ter­na­tional cen­ter of gold trade will trans­fer from West­ern to Eastern coun­tries in the near fu­ture,” Hay­wood Che­ung Tak-hay, the hon­orary per­ma­nent pres­i­dent of the CGSE, told China Daily in an ex­clu­sive in­ter­view in Hong Kong.

The Chi­nese main­land is cur­rently the largest pro­ducer and buyer of gold world­wide, with to­tal pro­duc­tion and im­ports ac­count­ing for 60 per­cent of the global to­tal in 2015.

Ma­jor Asian ex­changes have been striv­ing in re­cent years to be­come new gold trad­ing cen­ters. Among these are the Shang­hai Gold Ex­change, which last month launched a yuan-de­nom­i­nated gold bench­mark, and lo­cal bourse op­er­a­tor Hong Kong Ex­changes and Clear­ing Ltd, which has re­vealed plans to launch gold fu­tures prod­ucts.

The CGSE last July launched the “Shang­hai-Hong Kong Gold Con­nect”, al­low­ing the ex­change le­gal ac­cess to the main­land mar­ket through 15 State-ap­proved banks with gold im­port li­censes.

But it is Shen­zhen, the next-door neigh­bor of Hong Kong, that holds the most prom­ise in this sec­tor, be­lieves Che­ung, given the show­piece Guang­dong city’s more than 30 years of ex­pe­ri­ence in metal trad­ing, se­cu­ri­ties and fu­tures bro­ker­age and forex deal­ing.

“Though trad­ing plat­forms are in Hong Kong and Shang­hai, the cus­tomers are in Shen­zhen,” he ex­plained. “Its de­mand has de­cided its po­si­tion as the cen­ter of the Asian and even global gold and jew­elry in­dus­try.” Shen­zhen is the coun­try’s largest pro­cess­ing base and trad­ing cen­ter for gold and jew­elry pro­duc­tion, pro­vid­ing for 70 per­cent of the main­land mar­ket.

Led by such con­fi­dence in Shen­zhen’s po­ten­tial, Che­ung, as chair­man of the Shen­zhen Qian­hai Chi­nese Gold & Sil­ver Ex­change So­ci­ety Ltd, led 68 of the CGSE’s 171 lo­cal and in­ter­na­tional mem­bers to reg­is­ter in the Qian­hai spe­cial eco­nomic zone in 2014.

Hong Kong’s CGSE is es­tab­lish­ing a 1,500-ton ca­pac­ity gold vault in Shen­zhen in order to con­nect in­land min­ing en­ter­prises and Shen­zhen’s pro­ces­sors with in­ter­na­tional in­dus­try par­tic­i­pants.

The fa­cil­ity, which is ex­pected to be one of the world’s largest per­ma­nent gold vaults, is lo­cated in a bonded port in the Qian­hai spe­cial eco­nomic zone, it­self part of the Guang­dong Free-Trade Zone (FTZ).

Che­ung re­vealed that the CGSE will in­vest at least HK$2 bil­lion to build the fa­cil­ity, which also in­cludes 100,000 square me­ters of of­fice and trad­ing area.

But the ware­house will take two years to build and, mean­while, the CGSE has teamed up with the In­dus­trial and Com­mer­cial Bank of China to open a tem­po­rary bonded ware­house this Septem­ber for cur­rent busi­ness.

The Hong Kong gov­ern­ment cur­rently has one ware­house at Chek Lap Kok air­port, built upon the re­quest of CGSE in 2005, but its 100-ton stor­age vol­ume is “far from enough”, Che­ung said.

Main­land jew­elry traders and man­u­fac­tur­ers usu­ally buy gold from Hong Kong, mostly through the CGSE, but that im­ported gold then has to be trans­ported to their fac­to­ries in Shen­zhen.

Che­ung be­lieves that hav­ing the ware­house in Shen­zhen can cut their trans­porta­tion and in­sur­ance costs by 10 to 15 per­cent. More­over, tax in­cen­tives in the Qian­hai spe­cial zone can at­tract many in­ter­na­tional and main­land gold traders.

In ad­di­tion, the ware­house not only serves CGSE mem­bers, but is also open to other gold ex­changes, Che­ung added.

For in­stance, it can pro­vide phys­i­cal de­liv­ery sup­port for bonded fu­tures prod­ucts, which the Hong Kong stock ex­change is de­vel­op­ing.

Che­ung be­lieves the ware­house has an im­por­tant role to play in the in­ter­na­tion­al­iza­tion of the main­land gold mar­ket and would help the coun­try gain greater pric­ing power in the global mar­ket.

Che­ung is “ex­tremely ex­cited” to be able to bring the CGSE’s busi­ness to Qian­hai. “The FTZ in Guang­dong is a golden chance for Hong Kong en­ter­prises to take off,” he said.

He pointed out that the SAR has had only one such op­por­tu­nity so far, and that was 35 years ago, when the Shen­zhen spe­cial zone was es­tab­lished as the pilot area for the coun­try’s re­form and open­ing up drive.

“At the time, many Hong Kong peo­ple went up to Shen­zhen to set up medium- and small-sized fac­to­ries mak­ing toys, clothes and other goods, and they in­deed earned a for­tune,” Che­ung said.

But with Shen­zhen mov­ing its man­u­fac­tur­ing in­dus­try to in­land cities and amid surg­ing costs of lo­cal land and man­power, the sit­u­a­tion has changed, he be­lieves.

What is worse, Che­ung is wor­ried that the Hong Kong econ­omy is be­com­ing stag­nant and threat­ened by Sin­ga­pore, Shang­hai, and even Shen­zhen. His method of re­duc­ing such threats is to co­op­er­ate with these ri­vals, as Hong Kong needs more eco­nomic part­ners.

He re­gards the re­la­tion­ship be­tween Shang­hai and Hong Kong as the neg­a­tive and pos­i­tive poles of the same mag­net, which can at­tract more traders if the pair works to­gether.

“And Shen­zhen is in the mid­dle of the mag­net, so we must go into Guang­dong FTZ.”

He refers to the open­ing of free-trade zones, es­pe­cially the Qian­hai area in Shen­zhen, as a sec­ond wind for Hong Kong’s fur­ther rise as a fi­nan­cial cen­ter.

The Qian­hai Shen­zhenHong Kong Mod­ern Service In­dus­try Co­op­er­a­tion Zone was es­tab­lished in 2010 and last year in­cluded in the China (Guang­dong) Pilot FTZ, which also cov­ers Zhuhai’s Hengqin and Guangzhou’s Nan­sha dis­tricts.

As of April 15, more than 90,000 com­pa­nies were reg­is­tered in Qian­hai, but only 3,142 of those were from Hong Kong.

Che­ung re­minded Hong Kong en­ter­prises, es­pe­cially medium- and small-sized com­pa­nies, to look ahead into av­enues for fu­ture ben­e­fits and seize the op­por­tu­nity as soon as pos­si­ble.

As for ex­plor­ing main­land busi­ness, he shows a sim­i­lar zeal. “As soon as I learned about the Qian­hai spe­cial zone four years ago, I tried to con­nect with its man­age­ment bureau and seek co­op­er­a­tion,” Che­ung re­called.

How­ever, he also urged the author­ity for more “bold” poli­cies in the zone: “For ex­am­ple, we need 22 hours of cus­toms clear­ance for the gold ware­house so that our users can op­er­ate in the evening.”

Con­tact the writer at grace@chi­nadai­lyhk.com

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