China Proposes to Launch Interbank Trading for Precious Metals

China has proposed to expand trading of precious metals from designated exchanges to the country's vast interbank market soon, a move that is set to increase liquidity and help Beijing gain stronger global pricing power for key commodities like gold, a person familiar with the situation told Dow Jones Newswires Wednesday.

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An over-the-counter market would allow investors, in this case banks, to trade in large quantities that far exceed the Shanghai Gold Exchange's current trading volumes, analysts said.

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"A market-maker system and more new products in gold will help increase liquidity, which is badly needed in China's gold market these days," said the head of precious metals trading at a foreign bank in Shanghai.

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Due to limited membership on the two exchanges, many investors, including banks, aren't able to directly trade the precious metals on the bourses.