China and Gold

Since the founding of New China, that is, the PRC, and for several years before the appearance of the Shanghai Gold Exchange (Shanghai Gold Exchange) in the country operated a strict system of state control and regulation of transactions in gold. Since 1982, China opened the market of gold, but by 1992 the state began to apply the policy of floating the price of the yellow metal, whereby the price of gold in the domestic market within a certain period adjusted for the impact of changes in the international gold market.

After the official opening of the Shanghai Gold Exchange on Oct. 30, 2002 in China put an end to a planned system of purchasing and distribution of gold, which operated for several decades, and began a new phase transition from a planned to a market form of government operations with gold. After 8 years c started SHBZ and by a gradual departure from the planned purchases of gold and the opening of trading in precious metals for the private sector, China has step by step to deepen reforms in the gold industry to achieve "synchronization" of domestic and international markets. And finally, it happened: August 3, 2010 The People's Bank of China issued the "Suggestions for promoting the development of the gold market, who openly express China's intentions toward removing or easing restrictions on transactions with gold. About it excitedly wrote many authoritative Chinese and foreign publications.

On the basis of market demand will increase the number of commercial banks, which have the right to conduct import and export of gold.

The state will encourage and guide commercial banks in transactions with derivative instruments (derivatives) on gold, denominated in Chinese yuan. In the statement, China's central bank also says that banks may be allowed to hedge their foreign positions in gold in order to stimulate trade yuanevymi derivatives. Chinese edition - Financial News - quoted the senior analyst at Industrial Bank of Jiang Shu (Jiang Shu): «The proposals formulated a project to develop the domestic Chinese market gold in the future ten years, not only from a strategic position, but also in terms of concrete actions to implement it."

One of the most significant items marked as "proposals" submitted to:

1) Adopt measures for the speedy development and introduction of legislative base for regulation of the gold market, promoting the adoption of the Regulations of the regulation of the gold market, the formation and entry into force of regulations on management of import and export of gold and its products, increased regulation of financial institutions in field operations with gold.

2) gold without VAT: favorable fiscal policies at the Shanghai Stock Exchange and the Shanghai Gold Futures Exchange, while remain unchanged. This means that the value added tax, which the gold is taxed at 17%, will be in the sale of gold in these markets back in full. In accordance with the regulations of the General Tax Administration of China, 17% VAT on gold returns to the participants and SHFB SHBZ after the transaction and issued on the basis of exchanges of documents. That is, in fact, gold is net of VAT, but only for those who play by the rules. Jiang Shu analyst believes that the policy of returning 17% VAT on gold - it is a great advantage, which shows public support in this area. In addition, the Exchange will explore the possibility to improve the tax regime for gold products and investment destination for gold transactions of commercial banks.

3) The Chinese government will continue to open trading in gold for foreign companies and increase the number of foreign members on the Shanghai Stock Exchange gold.

China - the largest producer of gold. In the past 20 years, China has provided the world of goods produced, and now it looks like is the turn of the Chinese gold. As a result of complex changes in the gold market in China becomes more open and attractive to the international community.

Enough to visit several Chinese jewelry trade shows and personally see the piles of gold bullion, which stands made to many well-known jewelry companies and lively pritsenivanie them visitors. Bullion can be bought without even leaving home through the Internet for home delivery.

Moreover, the use of online platforms for invest-operations with gold becomes the new mainstream in the gold market in China. As told Deputy Chairman of China Association of gold Shenbin Wang (Wang Shengbin), «China has already dozens of companies working in the field of gold investments, which have their own platforms for transactions online," - stated in the formal sector agencies gold.org . cn.

According to the Financial Times, last year, Chinese investors have purchased 73 tons of gold, compared with 18 tons in the previous year. This is an increase of 315% of the investors from the private sector - an impressive figure. According to analysts, what is now happening in China can be characterized as a process of massive capital flowing out of the real estate market in the gold market. In the last few years property prices in major cities grew rapidly and became comparable to the prices in world cities. Real estate investors have earned on an upward trend the big money, but now they are worried about the state policy aimed at cooling the market in order to prevent overheating and repetition of the next price bubble. Now, gold was for the masses of the most attractive and reliable investment product, and it can inflate its price even higher. So far, India has remained out of competition in terms of the consumer market with its gold a population approaching 1 billion people who are ready to buy a gold metal on any religious holidays and special occasions. China watching unparalleled golden power of India, but the time did not encourage the free acquisition of gold in its market. However, while gold prices every day, compete in setting new records, and world commodity and financial markets has not yet recovered, China, with his usual wisdom, has revised its policy on gold. Results can be seen now. Gradual liberalization of China's law governing capital transactions, transactions in financial derivatives, as well as exchange controls may lead to unpredictable consequences. China is the world's largest supplier of gold and the second largest consumer of it after India.

However one needs to take into account several factors:

1) according to different estimates of GDP per capita in 2009 was in India about 1000 U.S. dollars, while in China - 3600 U.S. dollars, ie more than 3 times more.
Of course, GDP per capita can not be a reliable indicator of welfare, but to give a general idea could well;

2) In 2008 China's ratio of household savings to GDP was nearly 52%, according to a committee member of the monetary policy of the People's Bank of China Fan Gang (People's Bank Monetary Policy Committee Member Fan Gang). And according to the World Bank, in the early 2000's ratio of household savings in India is hardly reached 25% and was lower than that of the five Asian tigers - Malaysia, South Korea, Thailand and Indonesia - to 80-years of 20 century. Some Indian analysts make optimistic forecasts that the current rate of savings in India already accounts for 38% and by 2030 will reach 45%. Even if this scenario is realized, India will not be able to compete with China in the gold race, if the government continues to liberalize the gold market, and the population entrenched tendency to keep their money in gold in its different forms.
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