Haywood Cheung: Hong Kong is considering establishing an international gold settlement center. Government-led efforts boost confidence, while the gold exchange will continue to focus on trading.

The government's plan to develop Hong Kong into an international gold trading center is expected to be announced this year.

Earlier market rumors suggested that the authorities were considering "starting anew" with the Hong Kong Gold Exchange (HKGX), formerly known as the Gold and Silver Exchange, due to its perceived inability to meet international standards. In response, HKGX Chairman Cheung Tak-hei stated in an interview with this newspaper that, based on his understanding, the government's current plan involves leading the establishment of a new international gold clearing center to enhance international market confidence and recognition.

At present, transactions are conducted over-the-counter without guaranteed delivery.

Following earlier local media reports that the government was considering setting up a new international gold trading platform, Cheung described the rumors as a "beautiful misunderstanding," emphasizing that the HKGX will continue to focus on trading. As for the new government-led platform responsible for clearing, it is expected that the HKGX's existing settlement services will be integrated into the new clearing center, with the two roles being complementary rather than conflicting.

Cheung pointed out that although Hong Kong's gold trading volume is significant on a global scale, many transactions are conducted over-the-counter without guaranteed delivery. Therefore, the authorities aim to bring these transactions into a regulated framework. He stated that the industry widely supports the government-led establishment of an international gold clearing center, which would protect both buyers and sellers while boosting international recognition. He believes market participants are willing to engage and that there is clear demand for such an initiative.

A spokesperson for the Financial Services and the Treasury Bureau declined to comment on the government's potential plan to establish a new international gold clearing center. Last year’s Policy Address outlined Chief Executive John Lee’s proposal to develop Hong Kong into an international gold trading center, further strengthening its status as an international financial hub.

Meanwhile, the Airport Authority has announced plans to expand its precious metals storage facilities, and the Treasury Bureau established a working group late last year to study future development directions. An update is expected in the Policy Address to be delivered this Wednesday (17th).

Andrew Lee, a Legislative Council member representing the Financial Services sector, declined to comment on behalf of the working group but noted that the Hong Kong Gold Exchange already has a solid foundation, including its own trading and registration systems and a certification center. He emphasized that the exchange is not starting from scratch and that no institution is perfect. After conducting research, he stated that the industry prefers the authorities to make improvements based on the existing framework.

Learning from the Hong Kong Stock Exchange’s "Four Exchange Mergers" Experience

Lee Weihong previously suggested in a public proposal that the authorities could draw on the historical example of the "Four Exchange Mergers" that led to the formation of the Hong Kong Stock Exchange. He proposed introducing government-affiliated funds, regional banks, large asset managers, or members of the Hong Kong Gold and Silver Exchange as shareholders. He believes that establishing Hong Kong as an international financial center requires collaboration among various stakeholders, and government participation could play a significant role.

Haywood Cheung stated that the gold exchange fully supports learning from the experience of the Hong Kong Stock Exchange’s "Four Exchange Mergers" and introducing the government as a shareholder. He emphasized that the government’s role should be one of "participation" rather than "interference," and its involvement could enhance international recognition. The industry has already submitted suggestions to the government, and while the matter is under study, no conclusion has been reached. The authorities’ stance remains unclear.

The Hong Kong Gold Exchange, formerly the Gold and Silver Exchange Society, has a history of over 115 years and is Hong Kong’s only exchange offering physical gold and silver trading. For many years, the exchange operated as a society, but this year it formally transitioned into a limited company. The newly established Gold Exchange has taken over the precious metals trading operations to facilitate the recruitment of international members. Cheung mentioned that they have received inquiries and that the board is exploring ways to attract more international traders, gold dealers, and institutions.