Government Panics Over Price Inflation, Hinders Gold Buying

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Here’s another indication that the price inflation in China is much greater than the official reports of around 4.0%.

Gold exchanges in China outside of two in Shanghai have been banned, according to a statement from the the People’s Bank of China, the Ministry of Public Security and other regulators. This is a clear sign of panic among government officials. Chinese people were protecting themselves against the inflation by buying gold.

Until this order, gold exchanges operated throughout China.

"No local authority, institution or individual is allowed to set up gold exchanges," said the notice dated December 20.

The statement also said that the Shanghai Gold Exchange and the Shanghai Futures Exchange are enough to meet domestic investor demand for spot gold and futures trading.

The PBOC said it would lead a team to insure that gold exchanges will be closed, banks will stop providing clearing services to them; and some people will be put under police investigation for possible irregularities at exchanges.

Reprinted with permission from Economic Policy Journal.

2011 Economic Policy Journal

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