Yuan takes another step toward currency convertibility as Shanghai free-trade zone opens
Three gold-bullish, dollar-bearish stories on China are in the news:1) Robin Bromby of The Australian newspaper disputesGoldman Sachs' call last week that gold possibly could fall to $1,000. Not with China waiting in the wings, he argues:
"They'll be clinking champagne glasses at the People's Bank of China after reading Goldman Sachs' latest gold forecast. The Chinese central bank will be looking forward eagerly to filling more of its vaults with the metal at bargain basement prices. …
"Chinese gold-buying in the three months to June 30 was up 148% year-on-year (and there were steep rises in Thai and Indonesian buying, too).
"'Astounding' was the word GFMS used in relation to the Chinese purchases. Worrying, is the word we would use: Western investors will probably rue their selling decisions. …
"There is enough demand to ensure gold will not reach $1,000. Too many mines would go out of business."
2) Meanwhile, "This Is Beijing," a Web site authorized by theInternational Communication Office of the CPC Central Committee and operated by the China Internet Information Center, reports that gold vending machines have been unveiled at bank branches in Beijing:
"The machines, which enable the public to purchase and take immediate delivery of small gold bars and other precious metal products at the push of a button, were launched by Hua Xia Bank.
"Like cash ATMs, the machines are equipped with a touch screen and card slot. What makes them different is a 'delivery slot' on the lower right, from which consumers can receive the products.
"Transaction on the machines is quite users-friendly. After deciding which products to buy, consumers only need to scan an ID card and pay with a debit card or deposit card, according to an official at Hua Xia Bank. The whole transaction process takes six to seven minutes, the official added.
"'A total of 24 precious metal products are now available in the machines. Product prices are set according to market prices. No procedure fee is charged,' said a staffer from the machines' manufacturer.
3) And on a macro level, Gordon T. Chang reports in Forbesthat the stature of China's currency is growing -- quickly -- on the world stage:
"The Shanghai free-trade zone, China's first, will officially open for business on Sept. 29. Just about every China economy maven has been following the months-long saga regarding the establishment of the zone because in Shanghai the central government will punch a gaping hole in the country's currency wall. ...
"The betting is that the premier will announce some form of full convertibility for transactions in the zone. Hong Kong'sSouth China Morning Post reports an 'internal government document' states that 'on the condition risks can be controlled' firms in the zone will be permitted to 'undertake convertibility of the yuan on the capital account on a first-to-do and first-to-try basis within the zone.'
"The authorities apparently hope the zone will operate, in the words of Reuters, "as a fully liberalized trading hub for the Chinese currency." If Premier Li's rules allow companies across China to access the zone's financial institutions, he will have effectively made the renminbi fully and freely convertible. ...
"Now, provincial officials want their own free-trade zones. ... The result of rampant zone creation will be, as a practical matter, capital account convertibility for the entire nation. It's coming soon."
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