What Lessons Are Left as the Gold Exchange Curtains Close? (AI Translation)
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文｜财新周刊 王娟娟 张宇哲 程思炜
By Caixin Weekly's Wang Juanjuan, Zhang Yuzhe, Cheng Siwei
存在了十多年的地方金融资产类交易场所，带着金融创新的光环运作多年，从“使命重大”一步步发展成为非法融资的“帮凶”，屡屡整顿但乱象不止，最终被全面关停。
Local financial asset trading platforms, which have been in operation for over a decade under the halo of financial innovation, have evolved from entities with "significant missions" to becoming "accomplices" in illegal financing. Despite repeated efforts to rectify their operations, disorder persisted, leading to their eventual comprehensive shutdown.
2024年3月25日，湖南、辽宁、西安、重庆等地的地方金融管理局相继发布公告，宣布取消辖区内相关金融资产交易所/交易中心（以下统称“金交所”）的业务资质，取消后当地再无合规地方金交所；并强调市场上出现部分名称中带有“产登”“产登信息”“产登管理”“信登”“产权交易”“产交信息”“结算”等字样的企业，未经国家有权部门依法许可，为非标融资活动提供登记备案等服务，涉嫌违规经营，属于“伪金交所”，存在较大金融风险隐患，提示投资者抵制各类非法金融活动。
On March 25, 2024, local financial regulatory authorities in Hunan, Liaoning, Xi'an, and Chongqing issued announcements successively declaring the revocation of business qualifications for relevant financial asset exchanges/trading centers (hereinafter collectively referred to as "financial exchanges") within their jurisdictions. Following the cancellation, there were no longer any compliant local financial exchanges in these areas. The announcements also emphasized that some enterprises in the market, whose names include terms such as "property registration," "property information," "property management," "credit registration," "property rights trading," "property transaction information," and "settlement," have been providing registration and record-keeping services for non-standard financing activities without lawful permission from national competent authorities. These operations are suspected of illegal management and are considered "pseudo-financial exchanges" with significant financial risk hazards. Investors were warned to resist all kinds of illegal financial activities.
多位知情人士表示，金交所启动全面关停，接下来除北京外，各地现有的金交所将全部关闭。“2023年11月‘清理整顿各类交易场所部际联席会议’（下称“联席会议”）第八次会议确定了全面关停的目标。目前全国有28家地方金交所，除了北京金融资产交易所（下称“北金所”）将更名转型，其他的都要在一年内关掉。”一位知情人士对财新表示，未来将不再有金融资产交易所或交易中心这类机构了。
Multiple sources indicate that a comprehensive shutdown of gold exchanges is underway, with all existing local gold exchanges across China set to close, except for the one in Beijing. "The objective of a complete shutdown was established during the eighth meeting of the 'Inter-ministerial Joint Meeting on Cleaning up and Regulating Various Trading Venues' in November 2023," one insider told Caixin. Currently, there are 28 local gold exchanges nationwide, but apart from the Beijing Financial Asset Exchange (referred to as "BFAX"), which will be renamed and transformed, all others are expected to cease operations within a year. The future will no longer see institutions such as financial asset exchanges or trading centers.
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- Local financial asset trading platforms in China, once hailed for financial innovation, have been shut down due to their roles in illegal financing and disorderly operations. Regulatory authorities in Hunan, Liaoning, Xi'an, and Chongqing revoked the business qualifications of relevant financial exchanges on March 25, 2024, leaving no compliant local financial exchanges in these areas.
- A comprehensive shutdown of gold exchanges is underway across China, with all local gold exchanges set to close except for one in Beijing. This decision follows a history of these platforms facilitating non-standard financing activities and becoming hotbeds for illegal fundraising, despite repeated regulatory efforts to rectify their operations.
- The closure of these financial and gold exchanges marks a significant shift in China's approach to regulating non-standard financial assets and combating illegal financing. Despite the shutdowns, challenges remain in addressing disputes related to gold exchange products and ensuring investor protection against losses from such investments.
Local financial asset trading platforms in China, once celebrated for their innovative approach to finance, have faced a significant crackdown due to their involvement in illegal financing activities. Over the years, these platforms evolved from their original mission into entities that facilitated non-standard financing practices without proper regulatory oversight. This led to repeated attempts by authorities to rectify their operations, but disorder and non-compliance persisted, culminating in a comprehensive shutdown of these exchanges across several regions including Hunan, Liaoning, Xi'an, and Chongqing as of March 25, 2024 [para. 1].
The closures were part of a broader initiative targeting not only financial asset exchanges but also local gold exchanges across the country. An insider revealed that all local gold exchanges would be shut down except for one in Beijing. This decision was made during the eighth meeting of the 'Inter-ministerial Joint Meeting on Cleaning up and Regulating Various Trading Venues' held in November 2023 [para. 2]. The move reflects concerns over these exchanges' roles in facilitating illegal financing and failing to contribute positively to the financial markets.
Initially established with significant state involvement and approved by provincial and municipal governments, local financial exchanges became hotbeds for various forms of capital flow outside standard regulatory frameworks. They engaged extensively in non-standard asset transactions including equity shares of P2P products and issuance of fixed-income products among others [para. 3][para. 4]. However, as regulatory policies tightened post-2018, these platforms came under scrutiny for their practices which often exploited regulatory loopholes [para. 5].
The crackdown on these exchanges is part of a larger effort by Chinese authorities to address financial risks associated with illegal trading activities. Since 2011, joint meetings led by the China Securities Regulatory Commission (CSRC) have been focusing on cleaning up and regulating trading venues involved in pseudo-equity and pseudo-bulk transaction categories among others [para. 6]. The recent shutdowns are seen as an extension of these efforts aimed at curbing illegal fundraising activities that have become rampant through "pseudo-financial exchanges" following tighter regulations on formal financial systems [para. 7].
Despite the reduction in the number of local gold exchanges from a peak of 80 to 28 before this round of closures, challenges remain. Many investors find it difficult to distinguish between legitimate and illegitimate platforms leading to widespread involvement in risky investment products offered through these channels [para. 8]. The problem is exacerbated by entities like Zhongzhi Enterprise Group and Evergrande Group which utilized these platforms for massive-scale structured financing products suspected of illegal fundraising [para. 9][para. 10].
The closure of these exchanges does not immediately resolve issues related to outstanding legal disputes or investor losses from defaulted fixed-income products sold through them. Legal experts suggest that while investors can pursue lawsuits against financing parties or even the exchange platforms themselves for compensation over investment losses due to illegal fundraising activities, proving fault and obtaining compensation remains challenging [para. 11][para. 12].
This comprehensive shutdown marks a significant shift in China's approach towards regulating its financial markets. It underscores the government's commitment to addressing systemic risks posed by non-standard financing practices while highlighting ongoing challenges in protecting investors and maintaining financial stability amidst evolving market dynamics [para. 13].
- March 2009：
- The Ministry of Finance issued the "Management Measures for the Transfer of State-Owned Assets of Financial Enterprises"
- May 2010：
- China's first two financial asset exchanges, Tianjin Financial Assets Exchange (Tianjin Exchange) and Beijing Financial Assets Exchange (Beijing Exchange), were established
- 2011：
- The State Council initiated the establishment of a joint meeting system led by the China Securities Regulatory Commission (CSRC) and participated in by relevant departments, aimed at addressing and rectifying financial risks inherent in illegal trading activities across various trading venues
- 2013：
- Regulatory restrictions placed on consigned loans combined with wealth management products
- November 2011：
- The joint conference conducted clean-up and rectification of pseudo-equity and pseudo-bulk transaction categories
- 2017：
- The conference began to regulate the markets for precious metals, crude oil, and philatelic numismatic cards
- 2018：
- The focus of clean-up and rectification shifted to financial asset trading venues, and a whitelist of permitted trading products was issued
- April 2018：
- Comprehensive regulations to address shadow banking issues, known as the "New Asset Management Rules"
- November 2018：
- Regulatory authorities released the "Opinions on Prudently Handling the Remaining Issues and Risks of Local Trading Venues" (referred to as "Document No. 2")
- July 2019：
- The fourth joint meeting was held
- December 2020：
- The fifth joint meeting was held
- 2021：
- A joint meeting once again patched up the cleanup and rectification of the Gold Exchange by explicitly banning financing for real estate enterprises and urban investment companies, reducing the scale of non-standard financing
- December 2021：
- The Guizhou Provincial Local Financial Supervision and Administration Bureau issued a document stating that six exchanges within its jurisdiction would no longer engage in financial asset trading activities
- March 25, 2024：
- Local financial regulatory authorities in Hunan, Liaoning, Xi'an, and Chongqing issued announcements successively declaring the revocation of business qualifications for relevant financial asset exchanges/trading centers (hereinafter collectively referred to as "financial exchanges") within their jurisdictions
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