The China Merchants Bank (CMB) launched its repurchasable gold
bars business in the capital city on Tuesday. It plans to extend
the business to Shenzhen next, and a step-by-step national rollout
is likely to follow.
CMB is a sales agent for the repurchasable gold bars processed
by CGS Ltd., a mainland-Hong Kong joint venture. The first batch of
gold is available in two-ounce, five-ounce and 10-ounce bars, all
99.99 percent pure.
The buying and selling prices of the gold bars will fluctuate
based on the quotation of the London Precious Metals Exchange and
with reference to the Shanghai Gold Exchange, China's sole gold
market.
Yesterday, gold bars were bought at 3,272.9 yuan (US$394.33) and
sold at 3,279.1 yuan (US$395.08) per ounce, or 105.23 yuan
(US$12.68) and 105.43 yuan (US$12.7) per gram, according to the CGS
Standard Gold Bar Quotation.
CGS declined to disclose the exact amount of gold it has
provided to CMB, but it has guaranteed enough to supply the
market.
Huang He, of the CMB Beijing Branch, said a processing fee of
109 yuan (US$13.13) per ounce for buying and 62 yuan (US$7.47) per
ounce for selling is added to the transactions.
Trial operation of the gold business was conducted in Chengdu,
capital of Sichuan Province, from last November.
On November 2, the first business day, five CMB Chengdu outlets
sold a total of 4,167 grams of gold. The transaction value reached
460,000 yuan (US$55,422), with the selling price set at 107.05 yuan
(US$13) per gram on the day.
A CMB expert estimated the yield on repurchasable gold bar
transactions might reach 5 percent on average.
"We are cautious about expanding the business and will
concentrate on nurturing it. That is why we do not expect quick and
high returns in the primary stage," said Gao Li'ang, general
manager of CGS Ltd.
Meanwhile, the company and CMB will jointly provide more
investor services and derivative financial products, including an
online business and gold mortgages.
Small gold bars have been available in China since November
2002, when department stores in Beijing, including China Art and
Crafts Plaza, Guiyou Plaza's Jianguomen and Fangzhuang outlets and
the Caishikou Department Store, were given the go-ahead to sell
gold bars to individual consumers.
"The gold transactions in the bank are more standardized and
convenient than in the department stores, given the bank's reliable
financial support and rich financial management experience," said
Xu Shouxin, deputy secretary-general of the China Gold
Association.
Most of the gold bars sold in department stores are for
decoration and commemoration, and attract higher processing charges
than the standard gold bars.
The Bank of China Shanghai Branch launched its Gold Treasure
paper gold business last November, which has witnessed transaction
volume growth of 40 percent month-on-month.
So far, four State commercial banks have submitted applications
to the China Banking
Regulatory Commission to open gold transaction businesses.
The Shanghai Gold Exchange will begin trial issue of 50-gram
gold bars next Monday. Currently, the smallest bars traded are 1
kilogram.
"The new product is to meet the requirements of individual
investors and further accelerate transactions in the market," said
an official of the Shanghai Gold Exchange.
Liu Shan'en, an expert at the Beijing Gold Economics Research
Center, said that businesses are all eyeing the huge potential of
the gold investment market.
"Currently, the nation's deposits stand at 10.3 trillion yuan
(US$1.2 trillion). After liberalization of the market, the capital
flowing into the gold investment market is estimated to be between
60 billion yuan (US$7.2 billion) and 200 billion yuan (US$24.1
billion), according to our research," said Liu.
The China Gold Association reports that China is the
third-largest gold consumer and the fourth-largest producer
internationally. The country consumed 230 tons of gold in 2003, and
produced 200 tons.
(China Daily June 23, 2004)