Making Hong Kong an international gold and commodities hub is a “new entry point” to reinforce the city’s strength in finance and shipping, and the near-term goals are to expand storage facilities and woo commodity traders, Financial Secretary Paul Chan Mo-po said on Sunday.

Chief Executive John Lee Ka-chiu announced plans in his third Policy Address last week to develop world-class gold storage facilities in the special administrative region, and consider tax concessions and support measures targeting commodity trading. Within a year, a dedicated workshop will be established to explore financial technology applications and the inclusion of gold-related products in the special administrative region's market access program with the Chinese mainland.

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“As a first step, we plan to increase gold storage facilities in Hong Kong and accelerate the expansion of related businesses, such as trade, insurance, and logistics,” Chan said in his weekly blog.

The SAR will then expand into related derivative transactions like collateralization, lending and hedging, gradually exploring closer connections with the mainland’s gold market.  

Gold serves as a key safe-haven investment and an important anchor in the precious metals category, with its attributes as a commodity, reserve asset and investment product. As geopolitical situations become increasingly complex and uncertain across various regions, the global demand for gold is expected to remain substantial, Chan said.

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The SAR now ranks among the world’s largest import and export markets for gold by volume due to its proximity to major gold consumption markets like the mainland and India.

According to Chan, the turnover in the 0.99 metal fineness of the gold traded on the Chinese Gold and Silver Exchange has achieved a compound annual growth rate of more than 18 percent in the past decade. In the first quarter of this year, turnover has grown by about 20 percent year-on-year.

Beyond gold, the trading of commodities like non-ferrous metals is crucial to the global economy and a stable supply of raw materials. This means it involves an extensive supply chain and is able to generate significant demand for financial services related to risk management and hedging, said Chan.

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“Developing a commodity trading ecosystem can become a new pillar for enhancing Hong Kong’s role as an international financial, shipping, and trade hub,” he said, adding that it can also stimulate shipping and logistics business in the Guangdong-Hong Kong-Macao Greater Bay Area.

In the short-to-medium term, Hong Kong’s priority is to expand and promote commodity trade and its value-added services, Chan said.