China has officially ended retail paper gold trading as part of a strategic shift toward physical bullion investment. According to reports from Jefferies, the Industrial and Commercial Bank of China announced on June 24 that it would discontinue individual precious metals trading linked to the Shanghai Gold Exchange, effective July 24. The bank discontinued both leveraged deferred contracts and spot contracts, requiring retail investors to close positions or take delivery by the deadline. Other Chinese banks have made similar announcements, as reported by Jefferies' Christopher Wood in his GREED & fear note dated July 30.
The shift coincides with significant infrastructure developments in Hong Kong. As reported by Jefferies, the Hong Kong Precious Metals Central Clearing Company launched a central gold clearing and settlement system on July 7, introducing a Hong Kong-specific gold price reference rate called HAU. The company also launched the first phase of a 'Delivery Connect' scheme with the Shanghai Gold Exchange, enabling cross-border settlement using physical gold. This development mirrors Hong Kong's Stock and Bond Connect schemes with mainland China, according to the report.
Hong Kong is significantly expanding its gold storage capabilities to support the physical trading shift. According to Jefferies, Hong Kong aims to expand its gold storage capacity from 200 tonnes to more than 2,000 tonnes within three years. The Shanghai International Gold Exchange opened a certified gold vault in Hong Kong last year, marking the first in a planned network that will extend to Singapore and Riyadh. This infrastructure development supports Beijing's active encouragement of physical gold trading and investment, as noted by Jefferies' analysis.
China's gold market is experiencing unprecedented demand growth, supporting the strategic shift toward physical investment. As reported by Jefferies, China's gold imports rose 172% year-on-year to 173 tonnes in June, the highest since March 2024, worth roughly US$24 billion (approx ₹2.29 lakh crore). China's gold ETF assets have grown to Rmb247 billion (approx ₹3.48 lakh crore), up from just Rmb52 billion (approx ₹73,240 crore) in July 2024. Additionally, so-called 'gold accumulation accounts' where retail buyers accumulate physical gold in small increments could hold Rmb200-300 billion (approx ₹2.82-4.23 lakh crore), according to Jefferies China financial analyst Betty Li.
The gold market shift aligns with China's broader financial infrastructure development outside the US dollar system. According to Jefferies, the Cross-Border Interbank Payment System (CIPS) transaction value rose from Rmb481 billion (approx ₹6.77 lakh crore) in 2015 to Rmb180 trillion (approx ₹2,535 lakh crore) in 2025. Shanghai gold trading volumes reached Rmb50 trillion (US$6.9 trillion, approx ₹704 lakh crore) last year, still well below the London Bullion Market Association's estimated US$58 trillion (approx ₹5,533 lakh crore). The infrastructure developments support China's long-standing effort to build settlement infrastructure independent of US dollar dominance.
