Hong Kong's "Golden Opportunity"

The Group of Seven (G7) held a summit of heads of state in Bavaria, Germany this week. The United States, Britain, Canada and Japan jointly proposed to ban the G7 from importing gold from Russia in order to cut off its source of income as punishment for its invasion of Russia. , the news said that the decision will be officially announced on Tuesday (28th).

Russia has gained a lot of trade surplus from the gold trade in recent years, which has brought huge foreign exchange income for it.

According to statistics, in 2021, Russia will export gold worth 17.4 billion US dollars (the same unit below), but the gold trade surplus will reach 17.3 billion, ranking second in the world after the United Arab Emirates' 18.2 billion in terms of surplus.

Moreover, according to the data provided by the G7, nearly 90% of the gold exported by Russia is sold to the G7 countries (mainly the UK). This is why the G7 targets Russian gold.

Sources say the United States, Britain, Canada and Japan have jointly moved to ban the G7 from importing gold from Russia in order to cut off its source of income.

Banning gold may become a copy of oil

Although the G7 seems to have a certain rationale for Russia's gold exports, the actual impact on Russia is likely to be limited, and it will only adjust the destination of Russia's exports in the end.

Looking at the data, none of the G7 countries are the main buyers of the international gold market. According to the data in 2021, the G7 combined account for less than 20% of global imports, and the UK, which imports the most, only accounts for 13.6% of the market.

The main buyer of gold is Switzerland, which will buy 92.3 billion gold in 2021, accounting for 23.4% of global imports.

While China (including Hong Kong) and India, which have close trade relations with Russia, imported as much as 72.8 billion (18.5%) and 55.8 billion (14.1%) respectively.

Although Russia has a large gold surplus, its export volume is only 17.4 billion, accounting for only 4.4% of the world's total exports.

Even if the G7 bans buying Russian gold, other markets can easily fill the demand gap.

This means that even if the G7 issues a gold ban on Russia, the effect is likely to be like a ban on oil, but it will only divert Russian supply to the huge market in Asia.

In fact, in doing so, the G7 is not so much trying to prevent Russia from obtaining foreign exchange, but more like it is monopolizing gold transactions in advanced countries for itself.

For example, the United States, the United Kingdom, Canada, and Japan, the four countries that proposed this proposal, all have large gold exports. For example, the United Kingdom exports 41.4 billion yuan (10.5%) per year, while the other three countries except the United Kingdom are all net gold exporters, and the surpluses are respectively It ranks third in the world (United States, 13.8 billion), fifth (Canada, 8.5 billion), and seventh (Japan, 7.3 billion).

Banning Russian gold imports may have a limited impact on Russian exports, but it could exclude it from its own competitive market.

Hong Kong's gold import and export ranks top five in the world

The decision of the G7 may be a business opportunity for Hong Kong.

Although Hong Kong itself does not produce gold, it is an important gold trading port in the world.

In 2021, Hong Kong's gold import value will reach 29.1 billion and its export value will reach 30.8 billion, ranking fifth and third in the world respectively.

The reason why Hong Kong has such a large amount of gold trade mainly depends on the mature precious metal trading market in Hong Kong.

In 1910, Hong Kong established the Gold and Silver Exchange, the only precious metal spot exchange in Hong Kong with immunity.

The existing 171 members are mainly from banks, large chain jewelers, gold smelters and financial institutions.

It has the Hong Kong Precious Metals Verification Center (HKPMAC) which is in line with international standards and requirements and is still internationally recognized for the gold product fineness test.

Moreover, the Hong Kong market has experienced many events of large fluctuations in the price of gold in the past, and it can still operate as usual and has a good reputation.

Hong Kong is one of the world's major gold trading markets.

The massive gold trade creates jobs and income for Hong Kong, which is part of the city's financial center.

In the past, Russian gold was mainly supplied to the British market and had little to do with Hong Kong.

But the G7 gold ban will likely shift Russian gold to the Asian market, which may be an opportunity for Hong Kong to increase market trading.

If Hong Kong can take over gold from Russia and become the main trading venue for its foreign sales, it will bring up to more than 17 billion yuan in business for Hong Kong gold, which is almost 50% of the current transaction volume, which is likely to become a Hong Kong gold market. "Golden" opportunity.

Hong Kong's system does have advantages, but competition in regions such as Singapore is still huge. Relying on institutional advantages alone may not be able to come out ahead.

The government should take the initiative to take advantage of the close relationship between the mainland and Russia to first occupy a favorable position in the expansion of the Russian gold market, which may be able to achieve twice the result with half the effort.

Energy, food and current crisis, sanctions and turmoil, the consequences of the war are gradually emerging