Nymex wants to replace real metal with paper gold in China

Nymex wants to replace real metal with paper gold in China

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Nymex Looks to China
For Trade in Gold Futures

By Helen Sun
The Wall Street Journal
Thursday, June 29, 2006

BEIJING -- The New York Mercantile Exchange is hoping to begin the
trading of gold futures contracts in China, a senior official said.

In an interview, John Hanemann, vice chairman of the governors
committee of Nymex's Comex Division, said the exchange has been in
talks about launching its gold futures contracts with Chinese
exchanges. China, meanwhile, has been looking to further develop its
local derivatives markets.

"We have been seeking opportunities to cooperate with Shanghai Gold
Exchange to launch gold futures, perhaps as a joint product," Mr.
Hanemann said.

The plan, if it goes through, will not only see the first gold
futures contracts being traded in China but would also be the first
joint derivatives product between a Chinese bourse and an overseas
exchange.

Currently, trading of gold bullion, gold bars, and platinum on the
Shanghai Gold Exchange is limited to spot transactions. Chinese
investors aren't allowed to trade futures on overseas exchanges.
This also applies to state-controlled institutions, except those
that have special licenses from the government. China's futures
markets are off-limits to foreign investors, too.

The idea of gold futures trading in China isn't new. When the
Shanghai Gold Exchange was set up in late 2002, the government said
futures trading would eventually happen, but only when "the time is
ripe," according to Dai Xianglong, the then-governor of the
country's central bank.

Mr. Hanemann didn't provide a timeframe for the launch of such a
product, which is still being deliberated by the China Securities
Regulatory Commission. The regulators are likely concerned about the
risks of derivatives trading.

Since China is the world's fourth-largest gold producer and
consumer, "local enterprises have been calling for the launch of
gold futures as soon as possible for a long time," said Yang Yijun,
the head of Chengdu Gold & Silver Ltd.'s research center. "It will
come, sooner or later."