Xu Zhengyu: Hong Kong's central gold settlement system to be officially launched in the first quarter of 2027, HKMA actively implementing Exchange Fund's increased gold holdings

On November 11, Christopher Hui, Secretary for Financial Services and the Treasury of Hong Kong, stated in a written reply to Legislative Council member Lee Wai-wang that the Hong Kong Central Gold Clearing and Settlement System (Settlement System) began its pilot operation in July this year under the supervision of the Hong Kong Precious Metals Central Clearing Co., Ltd. Eleven banks are acting as interim direct participants, providing the market with efficient and reliable international standard OTC gold trading clearing and settlement services. The market response has been positive during the trial period.

The 2026 Policy Address announced that the system will be officially launched in the first quarter of 2027. Before its official launch, the Settlement System will be connected to the Real-Time Gross Settlement System to realize "delivery-versus-payment" settlement. Leveraging Hong Kong's world-class fund clearing and settlement capabilities, seamless connection between gold trading and physical delivery will be achieved. The government is also exploring cooperation with the London Bullion Market Association regarding the implementation of Good Delivery standards, aiming to integrate internationally recognized standards into Hong Kong's gold market infrastructure.

In response to a lawmaker's question on whether experience from Hong Kong Exchanges and Clearing would be referenced to enhance participation and support for the modernization process of the Hong Kong Gold Exchange, Christopher Hui replied that the predecessor of the Hong Kong Gold Exchange was the Chinese Gold and Silver Exchange, a private entity founded in 1910, which was later restructured into its current corporate structure and name in 2025. The Exchange operates under a self-regulatory model, with members required to follow relevant codes of conduct. The government has consistently maintained communication and contact with the Hong Kong Gold Exchange on areas such as internal management and member supervision, and provided appropriate liaison support during its corporate restructuring process.

Furthermore, the Policy Address proposed that the government will promote the establishment of a Gold Industry Association. The Financial Services and the Treasury Bureau is assisting the preparatory committee in in-depth discussions on the association's structure, membership qualifications, and financial arrangements. The industry association will be able to gather opinions from relevant stakeholders, including the Hong Kong Gold Exchange, to foster collaboration across the entire gold trading ecosystem.

Regarding the proposal to expand the categories of permissible investment assets under the “New Capital Investment Entrant Scheme” to include physical gold, Christopher Hui said the government has submitted an amendment bill to the Legislative Council to optimize tax incentives for funds and single family offices, which includes expanding the scope of eligible investments to cover precious metals. The government expects to resume the second reading debate on the bill within this year. If passed by the Legislative Council, the relevant revisions will apply to the 2025/26 tax year and thereafter.

As for the “New Scheme,” the government has already optimized the permissible asset categories for investment in 2024 and 2025 (including relaxing requirements for property investment) and application arrangements. The government will continually review the operation of the “New Scheme,” including arrangements for permissible investment assets, and will assess its effectiveness at the appropriate time.

Regarding the Hong Kong Monetary Authority's study on moderately increasing gold holdings in the Exchange Fund and participating in Hong Kong's spot and futures markets, Christopher Hui said the Policy Address proposed that the HKMA is studying a moderate increase of gold holdings in the Exchange Fund and participation in the spot and futures markets in Hong Kong. The current gold inventory will be gradually transferred to a warehouse designated by the Hong Kong Gold Settlement Company. The HKMA is actively working on moderately increasing gold holdings through the Exchange Fund and participating in Hong Kong's spot and futures markets. These measures will not only help diversify risk but also help promote sustainable and orderly development of Hong Kong's gold trading ecosystem, further consolidating Hong Kong’s status as an international financial center.

Christopher Hui stated that the HKMA will actively participate in the Hong Kong gold market in various ways, depending on the pace of market development and actual need, but the HKMA will not comment on individual assets of the Exchange Fund nor specify its asset allocation details publicly.

Editor: Zhu Henan