* Global Chinese exchange exceeds target of 30 members
* Foreign banks, refiners, trading houses sign up - source
* To allow offshore yuan in trading of gold contracts
* Aims to challenge dominance of New York and London
By A. Ananthalakshmi
SINGAPORE, Aug 22 China's planned global gold
exchange has signed up more members than targeted, as foreign
banks and trading houses seek direct access to the world's top
physical gold consumer and to test out reforms allowing them to
trade commodities in the yuan currency.
The strong response from foreign players will boost efforts
by China - also the world's biggest producer of gold - to gain
pricing power over the metal and to challenge the dominance of
London and New York in trading.
The Shanghai Gold Exchange targeted 30 companies for the
first round of membership but has signed up 40, including many
foreign banks, with just over a month to go before the launch, a
senior source with direct knowledge of the matter said.
The exchange's progress is being closely tracked by the
global trading community as gold is one of the first commodities
that China is opening up to foreign players by allowing them to
participate directly in physical trade and to use offshore yuan.
The bourse is set to begin operations on Sept. 29 in the
Shanghai free-trade zone, with three yuan-denominated physical
gold contracts, of 100 grams, 1 kg and the bigger London gold
delivery bar weighing 12.5 kg, according to the source who spoke
on condition of anonymity.
"It is too important a market to stay away," said Bernhard
Schnellmann, director of Swiss-based Argor-Heraeus, one of the
world's biggest gold refineries, which is considering joining.
"I think the SGE will be successful with this new exchange
as they have a big home market and there should be enough
The new free-trade zone is also seen as a testing ground for
currency reforms, as Beijing takes cautious steps towards
allowing full convertibility of China's currency.
Allowing foreign players to trade yuan-denominated bullion
contracts - without the need to exchange into U.S. dollars -
would give the Chinese currency more international exposure,
while also drawing in demand for gold in offshore yuan. Trading
offshore yuan is currently restricted to certain international
financial centres such as Hong Kong, Singapore and London.
"Having a gold contract delivered in the free trade zone in
local currency is interesting in terms of bringing together the
onshore and offshore players," said a trader with a bullion bank
that is considering being part of the exchange.
The senior source with direct knowledge of the exchange
declined to name the companies that had signed up, but market
sources said HSBC, Australia and New Zealand Banking
Group, Standard Bank, Standard Chartered
, Bank of Nova Scotia and J.P. Morgan
were interested in participating.
Refiners Argor-Heraeus and the Perth Mint were also
considering membership, company officials said.
It wasn't immediately clear if all the firms were joining as
the first set of trading members or would sign up later.
Metalor had told Reuters in June that it would join as a
"We're very keen to explore cooperation in the Shanghai Free
Trade Zone gold market and see the development of a new exchange
as being a great opportunity to entice foreign investment to
China's physical gold market," ANZ said in an emailed statement.
The other companies declined to comment.
The senior source with direct knowledge of the exchange said
the 40 members that had signed up, including international
banks, refiners and trading houses.
"The response has been better than our expectations," said
the source. "After the opening of the exchange, we will increase
the number of participants."
A spokesman for the SGE said it had targeted 30 members but
declined to say how many had signed up.
China - the world's biggest buyer of raw materials from
copper to coal - is pushing hard to establish pricing benchmarks
for a number of commodities.
China and other Asian gold trading centres such as Singapore
are seeking control over pricing of the precious metal as they
seek alternatives to the so-called London fix, the global
benchmark, which is being investigated by regulators on
suspicion that it may have been manipulated.
The active presence of foreign players in the Chinese gold
bourse is seen as an important positive step, though liquidity
and full convertibility of the yuan would ultimately determine
whether Chinese gold prices would be widely accepted.
(Editing by Ed Davies)