Editor's note: Hello everyone, welcome to DDN Business Insider. I am Yunfei Zhang. The international gold price is soaring and has once again become the focus of global markets. Against this backdrop, last week, the Hong Kong Financial Services and the Treasury Bureau signed a cooperation agreement with the Shanghai Gold Exchange and announced six measures to promote the high-quality development of Hong Kong's gold market. What does this mean for Hong Kong? What noteworthy trends are there in the development of the gold market?
【Anchor】Hello everyone, welcome to DDN Business Insider. I am Yunfei Zhang. The international gold price is soaring and has once again become the focus of global markets. Against this backdrop, last week, the Hong Kong Financial Services and the Treasury Bureau signed a cooperation agreement with the Shanghai Gold Exchange and announced six measures to promote the high-quality development of Hong Kong's gold market. What does this mean for Hong Kong? What noteworthy trends are there in the development of the gold market? Today, we have invited Li Daxiao, former chief economist of a brokerage firm, Robert Lee Wai-wang, member of the Legislative Council, and Guo Hanbing, postdoctoral researcher at the Institute of Finance at the Chinese Academy of Social Sciences, to provide commentary and analysis. Hello everyone!
First, let's look at the six measures recently announced by the Financial Services and the Treasury Bureau. The first is to expand airport warehouse facilities, with the Chief Executive mentioning a target of exceeding 2,000 tons within three years; the second is to deepen cooperation with Shenzhen by signing a memorandum of understanding; the third is to establish a central clearing system for gold, which will be managed by a government-owned company, with a trial operation planned for this year; the fourth is to expand tax incentives; the fifth is to launch a gold fund; and the sixth is to develop sustainable standards. Mr. Li, how do you evaluate these six measures overall? In particular, what do they reflect about the Hong Kong government's planning for the development of the gold market?
【Li】The establishment of a central clearing system and the deepening of cooperation between Hong Kong and Shenzhen are both very important measures. The integrated cooperation model between Hong Kong and Shenzhen, coupled with the central clearing system, I believe, will greatly enhance the overall development of the industry and refine the top-level design. Furthermore, regarding the tax incentives, these are also very significant—incorporating family offices and fund privileges into the tax framework should greatly facilitate investment and expand capital sources. Secondly, the 2,000-tonstorage capacity target represents a significant volume, particularly in the context of the current global gold pricing dominance of London and New York. As Shanghai gradually increases its influence and Hong Kong's market continues to improve, it is possible for Hong Kong and Shanghai to jointly enhance their global influence.
【Anchor】Among the measures, a new physical gold fund was mentioned, specifically the "Hang Seng Gold ETF," which was launched last Thursday. We saw that it surged by 9% on its first day of trading. As Hong Kong's first ETF, which allows investors to redeem physical gold at banks, what do you think is the significance of its launch?
【Guo】Its core value is quite significant. On one hand, it addresses investors' core pain points, and on the other, it lowers professional entry barriers. First, it operates based on a direct asset-backed structure, which enhances trust by ensuring each share is backed by physical gold. Unlike gold concept stocks, which are influenced by companies' operational cycles—where numerous factors can interfere and potentially disconnect performance from gold price trends—this ETF directly links to banks' physical gold reserves, with its shares corresponding directly to gold. It effectively converts gold price fluctuations into investment returns without various intervening factors. For investors who are generally not very familiar with financial reports and fear risks, this greatly reduces trust costs.
Another distinctly core value lies in its liquidity and pricing advantages. It can be traded on the exchange at any time, like stocks, and investors can also redeem physical gold through banks over the counter. For market makers, they can also arbitrage away price differences, avoiding the wide bid-ask spreads and storage inconveniences associated with traditional physical gold trading. Additionally, it eliminates the need to accumulate a specific weight of gold—whether several hundred grams or otherwise. Whether you want to allocate a small portion for hedging or strategically establish a large position to mitigate risks, this ETF product offers substantial flexibility. It effectively provides a low-entry, highly transparent, and trustworthy gold investment channel for investors with diverse needs.
【Anchor】Hong Kong has prioritized the development of an international gold trading center this year, and last week it signed a cooperation agreement with the Shanghai Gold Exchange. Mr. Lee, what are your views on the current development plans for Hong Kong's gold market?
【Lee】The Asian Financial Forum has been held in Hong Kong for 19 sessions. This year, a major focus has been placed on gold. From a macro-policy perspective, the Chief Executive's previous Policy Address also covered a wide range of initiatives aimed at developing Hong Kong into an international gold trading hub—covering areas such as warehousing, clearing, the establishment of an industry association, and even collaboration with the Shanghai Gold Exchange. We are now seeing these various elements being gradually implemented.
Against this backdrop, both the Chief Executive's remarks and our participation in a panel discussion underscored strong industry attention and anticipation for Hong Kong's future development in the gold sector. The panel brought together gold experts from different regions, including Swiss gold traders as well as professionals from Chinese-funded and foreign-funded institutions, all of whom shared a keen interest in and high expectations for the advancement of Hong Kong's gold industry.
【Anchor】Alright, Ms. Guo, what is your perspective? As we mentioned earlier, the current pace of international gold price increases is unprecedented. In the first month of this year, gold prices surpassed many previously projected annual target prices. However, last Friday, gold prices plummeted by over 5% during trading. With Hong Kong choosing to prioritize advancing the development of an international gold trading center and deepening cooperation with Shanghai, what in-depth considerations do you think lie behind this decision? What significance does it hold for the gold market layouts of both regions and the nation as a whole?
【Guo】Hong Kong has prioritized the development of an international gold trading center as a key focus for 2026. The timing is particularly apt, as global demand for gold as a hedging and allocation asset is skyrocketing. Whether from sovereign funds, institutional investors, or individual investors, there has been an increased allocation to gold. As mentioned earlier, Hong Kong aims to launch a trial of its own gold central clearing system by 2026, alongside a goal to expand storage capacity to 2,000 tons within three years. With the signing of a cooperation memorandum with the Shanghai Gold Exchange, this is no longer a one-sided initiative but a critical step for both Shanghai and Hong Kong to leverage their respective advantages. Through the establishment of hard connectivity, Shanghai will deeply participate in the rule-making of Hong Kong's gold central clearing system and in addressing risk management challenges. The storage and delivery systems of both regions will also be interconnected, creating a synergistic partnership where one plus one is greater than two.
In terms of practical value, the immediate collaboration between Shanghai and Hong Kong will rapidly expand the global gold trading ecosystem. In the medium to long term, it will drive the development of related businesses such as clearing, storage, and logistics. This will also allow Hong Kong to enrich its financial landscape, reducing its reliance on the stock market for growth momentum. In the long run, building an effective renminbi-denominated gold trading system is inevitable. Enabling international investors to settle gold transactions in renminbi—thereby bypassing the U.S. dollar system—effectively provides an anchor for the internationalization of the renminbi and can help break the long-standing monopoly of Europe and the United States on gold pricing. These are several core values of this initiative.
【Anchor】Alright. However, opportunities often come hand in hand with challenges. Ms. Guo, what challenges do you think Hong Kong might encounter in the process of building an international gold trading center?
【Guo】With the collaboration between Shanghai and Hong Kong, investors have access to more hedging tools, which will enhance the market's resilience to volatility. Therefore, short-term fluctuations in gold prices are not a major concern. The real test may lie in practical operational aspects. The first issue is alignment with international regulatory standards. Currently, global gold trading operates within a standardized framework—whether regarding the certification of deliverable products or the emphasis on sustainable gold (ESG) practices, both regions must ensure compliance with international norms.
Another consideration is the practical integration of cross-border cooperation between Shanghai and Hong Kong. After signing the memorandum, there will be differences in clearing rules, regulatory systems, and property rights recognition between the two regions. Will Hong Kong's warehousing receipt transfer rules be recognized under its legal framework? If cross-border deliveries encounter issues, how will responsibilities and rights be delineated? These matters require both regions to invest time in coordination and reconciliation. Nonetheless, addressing these problems and reconciling differences is a necessary path to consolidating the gold trading market and achieving internationalization.
【Anchor】Building on the cooperation agreement signed between Hong Kong and the Shanghai Gold Exchange, Mr. Li, what aspects of further cooperation can we expect between the two parties in the future?
【Lee】The Shanghai Gold Exchange and the Hong Kong Government have signed an agreement, which will pave the way for the introduction of central clearing in Hong Kong in the future. Central clearing can reduce risks, enhance efficiency, and enable market participants to operate under a more standardized framework within a single platform.
Of course, there are various existing practices in the market. Traditionally, gold trading has been conducted over-the-counter, with clearing arranged bilaterally between market practitioners and their counterparties. This initiative, however, marks the establishment of a central counterpartyclearing system, bringing together major active players from different segments of the Hong Kong market.
As mentioned earlier, this represents a further step in implementing the relevant initiatives outlined in the Policy Address.
【Anchor】OK, thank you to all the guests. That's all for this episode. Remember to follow us on YouTube or download our APP. I'm Yunfei Zhang. Thanks for watching, and see you next time.
Anchor: Laura Cheung | Edited: Kelly Yang, Laura Cheung, Rachel Liu | Translate: Kato Ip | Proofread: Chris Liu
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