Hong Kong Treasury Bureau: Building a Commodity Trading Ecosystem with the Development of an International Gold Trading Market as the Starting Point.

On June 10th, the Financial Secretary of Hong Kong, Paul Chan Mo-po, spoke at a meeting of the Legislative Council on the motion proposed by legislator Kenneth Leung for the "Promotion of the Development of the Commodity Trading Ecosystem and Physical Delivery Futures Market." He stated that the Hong Kong government is using the development of the international gold trading market as a starting point to build the commodity trading ecosystem. Gold and precious metals have dual attributes of commodities and finance. The Hong Kong Treasury is actively promoting the expansion of gold storage capacity in Hong Kong by the Airport Authority and financial institutions, as well as establishing the Hong Kong Gold Central Clearing System to provide efficient and reliable clearing services for international standard gold trading. Building on the strengths of the gold trading market, the Hong Kong Treasury will study the feasibility of extending related trading and storage experiences to other precious metals, such as silver, and gradually build a complete commodity industry chain. Paul Chan Mo-po mentioned that with the advancement of the internationalization of the Renminbi, the influence of the Renminbi in the commodity market is gradually increasing. The Shanghai Gold Exchange launched its first offshore delivery warehouse in Hong Kong last June and introduced gold contracts for delivery in Hong Kong and priced in Renminbi. In addition, the Hong Kong Stock Exchange has launched Renminbi-priced gold Exchange Traded funds (ETFs), and its holding company, the London Metal Exchange, is the world's largest base metals exchange, allowing the use of Renminbi as collateral, which helps accelerate the internationalization of Renminbi and attract more related traders to expand their businesses in Hong Kong and establish an ecosystem for related commodities. To enhance the regulatory rules for futures markets and financial derivative product systems, the Hong Kong government and regulatory authorities have implemented a number of reforms. The Securities and Futures Commission is studying the extension of the investor identification code system to the trading of derivatives products to strengthen market supervision and protect investor rights. Public consultations have been conducted on amending the Financial Resources Rules to implement more appropriate capital requirements for gold, other commodities, and foreign exchange over-the-counter derivative instruments to promote market competitiveness. At the same time, the Securities and Futures Commission has relaxed the position limits for trading major derivatives on major exchanges and optimized the interest rebate mechanism for cash collateral at clearing houses. Paul Chan Mo-po stated that to further strengthen the top-level design of commodity policies, the Hong Kong government has established a Commodity Strategy Committee led by the Financial Secretary, bringing together representatives from various policy bureaus, departments, and industry to conduct in-depth research on the opportunities for developing various major and emerging commodity businesses in Hong Kong, optimizing market mechanisms and regulatory frameworks, building industry ecosystems, and exploring connectivity with the Mainland market, and strengthening policy support and coordination resources for the development of commodity trading markets. Regarding logistics services for bulk commodities, the Hong Kong Transport and Logistics Bureau has been actively supporting the development of modern logistics, including reserving 32 hectares of land in the Hung Shui Kiu/Sha Tau Kok New Development Area for the development of a modern logistics circle to meet the land demand for various modern logistics facilities including bulk commodity storage. In addition, as an international logistics hub, Hong Kong has expertise, technology, and talent advantages in handling high-value goods, and the logistics industry in Hong Kong has the experience and ability to handle high-value bulk commodities such as gold and precious metals, providing strong support for the further development of commodity trading in Hong Kong. Furthermore, in the planning process of the Northern Metropolis Area (North District), the Hong Kong Development Bureau has also identified the high value-added modern logistics industry as an important industrial pillar. When coordinating the land use in the North District and other relevant land resources, the Hong Kong Development Bureau and its departments have clear responsibilities on matters related to the supply of storage land and the expansion of modern logistics facilities, such as planning the necessary land, formulating land leases and approval guidelines; and will fully coordinate with the Hong Kong Treasury and relevant departments such as the Invest Hong Kong and the Office of Strategic Industries to provide assistance to related companies.