BEIJING: Some banks with licences have recently had difficulty obtaining approval to import gold, they said — a move tied to China’s attempts to stop a weakening renminbi by tightening outflows of dollars, the banks added.
The hit to gold imports comes as China tightens restrictions on overseas deals by state-owned companies in an effort to limit capital outflows that has seen the renminbi fall to its lowest against the dollar in eight years.
The renminbi has slipped 5.8 per cent against the greenback this year, on track for its worst year on record.
Quotas for importing gold have been cut during quarterly assessments this year. Banks also have dollar quotas, some of which must be used when buying gold.
The limits on imports bite as the weakening renminbi raises Chinese investors’ interest in gold. Lower gold prices have also triggered more buying.
The combination of tighter quotas and an uptick in demand caused the premium for gold in China over the international gold price to jump as high as $46 in the past few weeks, according to data from Wind Information. Normal levels are about $2 to $4.
In an effort to ease that premium, Chinese banks have been allowed to import gold under their quotas using the offshore renminbi, one banker said. Although still high, the premium for gold on the Shanghai Gold Exchange has since fallen to $26, according to Wind data.
China capital curbs reflect buyer’s remorse over market reforms
If the restrictions on imports are sustained that could raise questions about China’s moves to open its gold market to international traders. The world’s largest consumer of the precious metal has moved to have a greater voice over the price of gold.
China imported about 905 tonnes of gold in the first nine months of this year, according to export data from Hong Kong, Switzerland, Australia and the UK, the main traditional sources. Much of that is normally re-exported as jewellery.
In 2013, China awarded three foreign banks — HSBC, Standard Chartered and ANZ — licences to import gold, which it controls via the quarterly quota system. A year later, the PBoC allowed the Shanghai Gold Exchange to set up an international board to open the market to foreign investors.
This year the SGE also launched a daily gold-pricing auction, similar to the process run in London between banks. In October ANZ started to participate in benchmark auctions.
“It’s like one step forward and three steps backwards,” one international banker said about the import restrictions.
China already restricts exports of gold, which means local prices can trade at a discount to global ones, further limiting the integration of its market with the rest of the world.
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