China's extensive Belt and Road Initiative has become an important part of the planning at many financial institutions in Shanghai, including the Shanghai Gold Exchange. It turns out there are a lot of opportunities for gold, along the Belt and Road, and Mi Jiayi has been finding out what they are.  

 

The Shanghai Gold Exchange is the world's biggest physical bullion exchange, and it launched a yuan - denominated gold benchmark in April last year as part of China's effort to raise its influence in the global gold market. The benchmark, known as Shanghai Gold, allows traders to trade gold in yuan, instead of in the US dollar, which better reflects local market flows and reduces gold's price dependency on the US dollar. Apart from setting up the yuan - denominated benchmark, the Shanghai Exchange has also been striking deals with several foreign exchanges to allow them to develop derivatives based on the Shanghai index. They include agreements with the Dubai Gold & Commodities Exchange, the Budapest Stock Exchange in Hungary and Russia's RTS Stock Exchange.  

 

JIAO JINPU, CHAIRMAN SHANGHAI GOLD EXCHANGE The Shanghai Gold Exchange is a very good platform to help push forward globalization and the BNR initiative. Our business is very international, and we play a leading role in the internationalization of the RMB. For example, offshore RMB can enter the gold market through the international board of our Shanghai Gold Index, which helps link both domestic and overseas markets.  

 

Before the Shanghai Gold Index was set up, most of the world's gold trade pricing relied on benchmarks set in London and New York, which are also the pricing centers for many other commodities. One analyst says that the establishment of the Shanghai Gold index can be an example for those commodities and their related financial derivatives.  

 

SHAO YU, CHIEF ECONOMIST ORIENTAL SECURITIES The world's biggest consumers of gold are China and India, but for a very long time the pricing was set in western countries. For example, London and New York have very important says in gold pricing, but they are not heavily involved in real production and trading. Now in fact, many BNR countries are either the producers or the consumers of gold. If Shanghai Gold and RMB pricing can become more internationalized, those producers and consumers will have a bigger say in the market, and result in the formation of a new world order. Other kind of commodities can follow the example of Shanghai Gold for similar reasons.  

 

The Shanghai Gold Exchange says it is also in talks with Thailand, Malaysia and Myanmar for similar types of cooperation, and that it will continue to develop more diversified gold derivatives to meet the demands of international trade.