Shanghai Gold Exchange is about to introduce silver trading for the first time after months of planning.

The regulatory framework for trading silver contracts will be completed as early as next month, said Tong Gang, the exchange's spokesperson.

The launch underscores the rapid development of the silver market in China, which is widely regarded as potentially the most important consumer, producer and exporter of the metal.

The exchange, which currently deals with platinum as well as gold, is expected to trade silver spot and spot-deferred contracts.

Spot contracts are ones that require payment at the time of purchase; spot-deferred contracts require payment a few days after the contract has been made.

Silver futures contracts could also be traded on the exchange.

The country's silver consumption, mainly used by electronics and chemical firms, was estimated at 2,600 tons last year. This compares with only 900 tons two decades ago.

The country is also an important producer and exporter of the metal.

Silver production in China has been soaring at 10 percent annually since 2000, when the State monopoly covering the purchase and marketing of the metal ended.

Last year production reached 6,000 tons.

The launch of silver trading may put the gold bourse in competition with the Shanghai White Platinum & Silver Exchange (WPSE), also known as the Huatong exchange, currently China's only official spot silver trading centre.

But WPSE's Liang Haifeng said: "The gold exchange will deal mainly in futures contracts which will attract more speculators than spot silver buyers."

Huatong's monthly silver transaction volume now stands at more than 30 tons.

The global price of silver has fallen by 30 percent since April, when it hit a 22-year high.

At the WPSE yesterday the price of silver closed at 2,960 yuan (US$370) per gram, down from around 3,400 yuan (US$425) in mid-April.

In a separate development, it was reported that the New York Mercantile Exchange (Nymex) is hoping to begin trading gold futures contracts in China, possibly at Shanghai Gold Exchange.

John Hanemann, of Nymex's commodity exchange division, was quoted by the Wall Street Journal as saying his bourse had been in talks about launching gold futures contracts with Chinese exchanges.

Shanghai Gold Exchange spokesman Tong said he was not aware of any talk with Nymex.

(China Daily June 30, 2006)