Hong Kong Gold Hub Gains Momentum with Yuan Futures and Clearing System

Hong Kong is building an international gold hub to support yuan internationalisation. The government-owned clearing and settlement system has begun trial operations, mirroring infrastructure used by the London Bullion Market Association (LBMA). A new yuan-denominated gold futures contract will be launched in early 2024, alongside a US dollar gold contract reactivation.

The initiative is part of a five-year financial plan that includes expanding yuan settlement for mainland Chinese services and creating a mechanism to spend renminbi receipts without converting them into Hong Kong dollars. The government plans to cut the profits tax rate for qualifying commodity traders from 16.5% to 8.25% by 2027, while increasing gold holdings in the Exchange Fund.

The vaulting capacity will be increased tenfold to 2,000 tonnes over three years, with metal storage exceeding 30,000 tonnes in Hong Kong's London Metal Exchange warehouse network, largely copper and zinc. Physical gold flows have rapidly increased into Hong Kong, with 107 tonnes entering the region in July.