In the next five year, the first bank of gold in China, the first bonded service (trade) platform for jewelry and jade, and the first civil physical gold trading and circulation hub will be established in Shenzhen, Guangdong province, according to the city’s plan.

By then, Luohu district will be completing the construction of China’s gold and diamond trading hub system, and Shenzhen will be taking a concrete step forward becoming a gold and diamond financial center with global competitiveness and international influence.

This is the main message Pi Jun, deputy director of Luohu financial services bureau, conveyed in the district government’s biweekly news conference on May 11.

Pi said, “Luohu’s financial industry will enter its ‘golden era’ of development, as the city of Shenzhen will take 24 concrete measures to help [the district] build the city’s core area of gold finance over the next five years.

“Luohu’s gold and jewelry industry has a good foundation, a large scale and good conditions to develop gold finance.”

However, Pi also said the district still had a lot to do in promoting the circulation of gold, improving the transparency of dealing , and making it easier for small and medium-sized gold and jewelry companies to obtain financing.

Data show that as China’s gold and jewelry manufacturing center and material procurement center, Shenzhen’s shipments of physical gold account for more than 60% of the total transactions of the Shanghai Gold Exchange.

The Shuibei area in Luohu has more than 6,900 related legal entities in the gold and jewelry industry, with annual gold sales totaling more than 120 billion yuan ($18.65 billion), accounting for 50% of the domestic gold wholesale market.

According to Pi, the goal of Luohu in exploring and developing the gold financial sector is to further improve the efficiency of Shenzhen’s financial services for the development of the real economy, and promote standardized and sustainable development of gold and jewelry enterprises.

According to the district government, Luohu will strive to build “a hub and five centers” over the next five years. The hub refers to the China gold and diamond trade system and the five centers refer to the China gold and diamond financial institutions agglomeration center, China gold and diamond financial business innovation center, China civil gold and diamond reserves circulation center, China gold and diamond integrated demonstration center and China gold and diamond financial information exchange center.

The efforts to realize these goals can be undertaken step by step, Pi said.

The first step is to establish a bank able to handle deposits of gold and gold loan. It is estimated that the establishment of this bank will create about 100 billion yuan of new loans from gold leasing business and 800 billion yuan of gold wealth management products in the long run, according to the district government.

Secondly, Luohu needs to accelerate the construction of the Shenzhen jewelry and jade products bonded services (trade) platform. It was reported that this platform would be the first of its kind in the city for the trade of a full category of jewelry and jade.

It will integrate functions of display, storage, processing, research and development, testing, supporting insurance, logistics, import and export customs declaration and other bonded services related to gold, jewelry and jade.

Data show about 30 to 40% of retail sales are contributed by gold buybacks. Therefore, another key task of Luohu is to build a civil physical gold trading and circulation hub. It is expected that through the platform, Luohu will be cable to increase the gold buyback transaction volume to above 100 billion yuan, and promote circulation of privately-owned gold.

It is expected Shenzhen becomes a hub for gold companies’ capital flows, and the first choice for domestic investors to buy and sell gold.

Much of the work is groundbreaking. For example, there is no precedent for asset securitization of gold mining right and mineral exploration right in China.

The financial risk compensation fund pool will also be a groundbreaking reform for Luohu. By the end of last year, the district had set up such a fund pool for the first time in the city. So far, 70 gold and jewelry projects have been registered, involving 20 gold and jewelry enterprises, and the total transaction volume exceeds 1.7 billion yuan, according to the district government.