The shanghai Gold Exchange started its official platinum trading yesterday, marking the government's effort to check the rampant smuggling of the precious metal. To encourage trading on the exchange, all transac-tions are exempt from having to pay the 17 percent value-added tax.

Platinum, which is mainly traded for making jewelry and not for investment, is the second precious metal to be traded in the exchange since it started gold trading last October.

Trading in the metal opened at its highest price of 193.95 yuan (US$23.43) per gram and closed at 190.69 yuan per gram yesterday, still higher than the global average of 186 yuan per gram. Yesterday's total trading volume hit 373 kilograms, more than one and a half times that of the trial day on July 30.

"Today's trading volume is relatively high since we jewelers are now in great demand of the precious metal," said Sun Changyan, trader with Shanghai Lao Miao Jewelry Co Ltd, a major local jeweler. "It is the premium time to sell platinum jewelry to lovers who plan to get married in October," she said.

Shanghai laofengxiang Jewelry Research Institute Co Ltd, another major platinum user, made the first transaction at yesterday's highest price.

"The preferential tax policy to transact platinum in the gold exchange is one major attraction to us," said Lu Xiaoying, a trader at Laofengxiang.

Currently, China Platinum Company, the only platinum importer allowed by the government, is the only sup-plier in the gold exchange.

Platinum traders on the gold exchange hoped more suppliers could take part in the trading and thus lead to a more reasonable price.

The ministry of Finance and the State Administration of Taxation of China jointly issued a notice in April stating that platinum transacted in the Shanghai Gold Exchange will be exempt from paying 17 percent value-added tax.

In china, platinum, most of which is imported from Russia and South Africa, can be traded in the market with prices moving in tandem with the world. But high duties of 3 percent import tariff and 17 percent VAT were levied.

As the world's biggest consumer of the precious metal, China imported 40 tons of platinum last year, accounting for 55 percent of the world's total output.

However, China's real platinum appetite was much larger than official figures, industry sources said.

(Shanghai Daily August 14, 2003)