Top Chinese banks, alongside Standard Chartered and ANZ, will be among 18 members to join a new yuan-denominated gold benchmark that signals China's biggest step towards becoming a price-setter for the metal.
As the world's top producer, importer and consumer of gold, China has balked at having to depend on a dollar price in international transactions, and believes its market weight should entitle it to set the price of gold.
The yuan gold fix, to be launched on April 19, is not expected to pose an immediate threat to the gold pricing dominance of London and New York, but it could ultimately give Asia more power, particularly if the Chinese currency becomes fully convertible.
The Chinese benchmark price will be derived from a 1 kg-contract to be traded by the 18 members on the Shanghai Gold Exchange (SGE), which will act as the central counterparty.
The price-setting process will include China's big four state-owned banks, Industrial and Commercial Bank of China , Agricultural Bank of China, Bank of China and China Construction Bank, the SGE said in a statement on its website.
Bank of Communications, Shanghai Pudong Development Bank, China Minsheng Banking Corp , Industrial Bank Co, Ping An Bank and Shanghai Bank will also participate.
Bank of China (Hong Kong), retailers Chow Tai Fook and Lao Feng Xiang, Swiss trading house MKS, Chinese miners China National Gold Group and Shandong Gold Group will also be members, SGE said.
The benchmark price, to be quoted in yuan per gram, will be set twice a day based on a few minutes of trading in each session.
The spot benchmark in London, quoted in dollars per ounce, is set via a twice-daily auction on an electronic platform with 12 participants after starting off with six.
The London fix, which was previously set via a teleconference among banks, was replaced by electronic auctions after a shake-up in benchmark setting following a scandal over rigging of the Libor interest rate broke in 2012.
Support from foreign banks will be crucial for the international use of the yuan benchmark, but China had struggled to get them to sign up due to sensitivity around benchmarks amid scrutiny by regulators.
Reuters reported in January that China had warned foreign banks it could curb their operations in the domestic market if they refuse to participate in the benchmark-setting process.
Standard Chartered and ANZ, the two foreign banks participating in the fix, have gold import licenses in China. HSBC also has an import license but was not named by SGE as one of the participating banks.
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