China has reportedly approached foreign banks and gold producers to participate in a global gold exchange in Shanghai because the world’s biggest producer and user of gold – China – wants to influence the price more than in the past.

China has approached foreign banks and gold producers to participate in a global gold exchange in Shanghai, Reuters has reported, quoting unnamed sources, because the world’s biggest producer and user of gold – China – wants to influence the price more than it has in the past.

As reported elsewhere last week, the Shanghai Gold Exchange has won regulatory clearance to set up a global trading platform in the city’s free trade zone, seen as a way of competing with financial centres such as London and New York for such global business. It is also a sign of how the FTZ is challenging traditional Asian wealth management hubs such as Singapore and Hong Kong.

The exchange has, Reuters said, asked banks such as HSBC, Australia and New Zealand Banking Group; Standard Chartered, and Bank of Novia Scotia, among others, to join the platform.

The report noted that the launch of a platform comes after Barclays, the UK-listed bank, was fined £26 million ($47.3 million) by the UK regulator for failings relating to gold price manipulation.

The report said HSBC and Standard Chartered declined to comment while other banks and the exchange were unavailable for comment.

The SGE’s gold platform will initially  host spot physical contracts for gold and other precious metals, before aiming to launch derivatives, the report added, quoting another unnamed source.

(Editor’s note: The idea of China seeking to compete with other major financial centres over gold trading makes perfect sense and is of a piece with its move to build the Renminbi as a global reserve currency. As a traditionally strong holder of gold, with an associated – and entirely understandable – suspicion of “paper money” – it is perhaps surprising that China hasn’t moved earlier. Full convertibility of the RMB would certainly boost China’s prospects of taking some of the action away from the West. And its proximity to a gold-producing nation such as Australia, for example, cannot be overlooked.)