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Chinese banks are increasing reserves of precious metals
Material posted: Publication date: 22-09-2014

The value of precious metals owned by China's largest lenders, has increased over the year by 66%. Banks began to lend to customers more gold, as stricter lending rules make it difficult for the loan.

According to financial reports at the end of the second quarter the value of precious metals in the possession of the four largest creditors of China Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., Agricultural Bank of China Ltd. and Bank of China Ltd. – was $ 378 billion yuan ($62 billion). Last year this growth outstripped the increase in the reference prices of the metal by 7.5%. China tries to curb lending, raising the cost of credit and reducing loans to sectors where there is a risk of bankruptcy because of the decrease in assets and increase in bad loans. As reported by the Bank Industrial Bank Co., this encourages banks to hold more precious metals to expand his business by leasing gold, since gold is not considered to be loan capital and apply to off-balance sheet loans.

"Over the past year the funding for gold has increased significantly, said by phone 29.08 partner at Shanghai Leading Investment Management Co. Xihua Duan (Duan Shihua). – Statistics of banks clearly shows that many companies in China continue to lack funding."

Chief analyst of the Bank Industrial Bank Co. Jian Shu (Jiang Shu), reported from Shanghai on the phone what the cost of Fund of precious metals in the banks is calculated in the prices of Shanghai gold exchange on the last day of the reporting period, and most of their assets banks hold in gold.

Gold reserves

The assets creditors were equivalent of about 1,445 tonnes of gold prices on 30.06.2014. It is 55% higher than a year ago, and more than 1,054 tonnes in reserves of the Chinese Central Bank (according to the world gold Council).

Ingots of purity 99.99% for the benchmark spot contract on the Shanghai gold exchange 30.06.2014 sold at 261.86 yuan per gram, a year earlier on 243.50 yuan. Today they traded at 252.80 yuan.

The value of precious metals in the possession of ICBC, the largest by market value Bank of China, for this period has doubled and is $ 91 billion yuan, it is reported in the financial statements of the Bank. This is the equivalent of about 347 tons of gold, which is 158 more than the year before.

Bank ICBC has significantly expanded as the business of leasing precious metals, and program of gold accumulation, in which individuals can on a monthly basis to defer a fixed amount of money to buy metal. It is reported in the statement of profit 28.08 the representative of ICBC in Beijing Jennin Wang (Wang Zhenning), who refused to comment to Bloomberg News.

Leasing deals

There are two types of leasing transactions. In the first case, the client takes the metal from the Bank and simultaneously enters into a forward agreement to hedge price risks – we read on the ICBC site. This allows companies to get cheaper loans, because the credit cost is lower interest rate loan.

In the case of leasing of physical gold to the customer from the branch, connected with gold is the metal for the needs of the business and pays him at the end of the lease term.

Construction Bank of China, the second largest lender of the country, owned precious metals to 51 billion yuan on 30.06.2014, equivalent to 194 tons of gold. A year earlier the Bank had precious metals to 33 billion yuan (137 tons of gold), according to the financial report of the Bank for the second quarter. Two calls to the press center of the Bank in Beijing went unanswered.

Physical demand

Agricultural Bank of China, the third largest lender in the country, on the date 30.06.2014 kept of precious metals of 21 billion yuan, equivalent to about 81 tons of gold a year ago, to 17 billion yuan, or 70 tons of gold. The Bank's representative in Beijing declined to comment.

According to the financial data, at the end of June the assets of the Bank of China precious metals were equal to 215 billion yuan or 823 tons of gold, a year ago to 570 tons of gold. On two calls to the press service of the Bank in Beijing, no one answered.

Strategy adviser to Scotia Bank China Liu (Liu Na) said that the decline in physical demand and reduction program use of commodities for financing may limit the growth of assets. 14.08.2014 world gold Council said that second-quarter gold consumption in the country dropped to 192.5 tons which is 52% less compared to the previous year as a result of strict measures for combating corruption it sold fewer bars, coins and jewelry. In April, ZDF said that in such transactions in China could be used up to 1,000 tons of gold.

Analyst at Beijing Capital Futures Co. Xu Liu (Liu Xu) reported that the investigation of frauds with the use of commodities as collateral for loans may also reduce demand for rental precious metals. Banks increase control over commodity financing, as the security bodies are investigating the possible multiple pledging of copper and aluminum at Qingdao port.


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