Dai Xianglong, governor of the People's Bank of China (PBOC), the nation's central bank, was the first to strike the bronze gong at the Shanghai Gold Exchange, located in a European-style mansion on the Bund, now Shanghai's prestigious financial street.

The first deal was done at 9:58 a.m., as the Shanghai Laofengxiang Jewelry Research Institute Co., Ltd. purchased one kilogram of gold from the Shandong Gold Group at 83.68 yuan (about10 U.S. dollars) per gram.

Lu Xiaoyin, a woman trader representing Laofengxiang, said the price is very close to that of the London gold market.

In the first minute, 14 deals were transacted. Before the first hour ended, 273 kilograms of gold changed hands.

In his speech, Dai Xianglong said that the opening of the exchange, on which silver and platinum can also be traded, marks the establishment of all major financial product markets in China, following the opening of currency, securities, insurance and foreign exchange markets.

Analysts called the gold market the "last fort of China's planned economy." Since the founding of new China in 1949, the production, sale and processing of gold was strictly controlled and monopolized by the government in compliance with state plan, while private trading of gold was totally forbidden.

As China is currently moving to a market economy, the old system has become increasingly irrelevant because it deprived gold enterprises of both pressure and vigor.

In April 2001, the central bank announced the abolishment of the monopoly system and the forming of a gold exchange in Shanghai.

On Nov. 28 last year, the Shanghai Gold Exchange went on a trial run.

Shen Xiangrong, chairman and general manager of the exchange, said that with the opening of the exchange, the central bank's function as the distributor of gold will cease, and that in a relatively short period of time, it will stop purchasing gold as well.

Liu Shibo, a research fellow with the Development Research Center of the State Council, the country's governing body, said that the deregulation of the gold industry will deprive enterprises of government protection and expose them to rigid competitions.

Enterprises will need to keep a still closer eye on the international gold market and learn more from advanced production and management technologies used by their overseas counterparts, he said. On the plus side, Liu predicted that the deregulation of the market will lead to an increased demand for fine instruments, arts and handicrafts, decorative materials and other industries.

The deregulation of China's gold market, the world's fifth largest gold producer and third largest consumer, has caught the attention of the international gold industry.

Albert Cheng, East Asia regional director of the World Gold Council, noted the opening will drive up world gold consumption and its impact on the global gold market cannot be underestimated.

"I am convinced that Shanghai will become the gold trading center of East Asia in the not too distant future," he added.

At present, the Shanghai Gold Exchange boasts 108 members from 26 Chinese regions. They include 13 commercial banks, 24 gold miners, 61 consumer units, eight refineries and two mints. Only members can trade in the exchange.

All transactions are subject to a 0.06 percent commission. The settlement is done by China's four state-run banks, namely, the Industrial and Commercial Bank of China, the Bank of China, the Construction Bank of China and the Agricultural Bank of China.

(Xinhua News Agency October 31, 2002)