Gold and Silver Alliance Partnership between Hong Kong and Shanghai

Global Business

The Hong Kong and Shanghai exchanges are considering a gold and silver trading alliance that would mark another potential collaboration between the two financial centers. Cathy Yang takes a look at the impact this proposed alliance would have.

Hong Kong and Shanghai Exchanges Plan Gold and Silver Alliance

Hong Kong and Shanghai Exchanges Plan Gold and Silver Alliance

The Hong Kong and Shanghai exchanges are considering a gold and silver trading alliance. Cathy Yang takes a look at the impact this proposed partnership would have.
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Economists see this as a positive. They could presumably more easily challenge the status of the U.S. as the world’s unchallenged commodity trading center.

Gold has traditionally been imported from Hong Kong into Shenzhen, where nearly 70 percent of the Mainland’s gold jewelry business is located. Plans of an alliance are taking place at a time when the Mainland surpassed India as the world’s largest gold consumer last year. But the proposed alliance comes days after news came out of the Mainland opening Beijing to gold imports — cutting into Hong Kong’s role as a transit point.

For some economists, the reported move is all tied in closely with Beijing’s push to internationalize the Chinese currency. They want to hedge against a fall in their currency reserve. They’re very nervous about the U.S. dollar and inflation picking up generally globally. It seems they’re just about to make more and more steps to liberalize the Renminbi and they think that if they increase the gold backing of the Renminbi that may prompt more and more other nations to place increasing trust in its currency.

Mainland imports of gold from Hong Kong may have dropped in March as local prices fell below London’s but for Wing On, it expects business to improve, supported by what economists see as a recovery in gold prices just as Mainland commodity markets open up to the rest of the world.