China's central bank, the People's Bank of China, has demonstrated the Chinese government's strong commitment to opening up the domestic gold market when its Shanghai branch let the Shanghai Laofengxiang Jewelry Corp, one of the country's largest jewelry processors, purchase old gold jewelry from the public days ago.
This is the first time that the central bank has officially transferred its power to purchase old gold jewelry to an enterprise.
According to Roland Wang, manager of the World Gold Council (North China), the central government's relaxation is another important step towards the deregulation of the domestic gold market.
Consumers are now permitted to exchange their old gold jewelry at the Laofengxiang Corporation for cash.
The Laofengxiang Corp is authorized to value the jewelry. The valuations have to be basically in line with fluctuations in the central bank's gold purchase prices, sources with the bank said.
Currently, the central bank's purchase price is 76.3 yuan (US$9.2) per gram.
The relaxation is an incentive for the domestic gold market, Wang said.
Demand for gold on the domestic market is mainly centered on jewelry.
The council's statistics indicated that the demand for gold on the Chinese hinterland reached 56.5 tons in the first quarter of this year.
The central bank piloted the relaxation of controls in Shenyang in Northeast China's Liaoning Province in the second half of last year and in Wuhan in Central China's Hubei Province in the first half of this year.
Before this relaxation, the central government had tightly controlled the purchase of gold and its allocation for decades. Consumers were only allowed to exchange their old gold jewelry for cash at the central bank's outlets nationwide.
Gold jewelry enterprises were forbidden to purchase gold from the public.
Consumers were only permitted to exchange their old jewelry for new at these enterprises.