Agreements signed between the Dubai Multi Commodities Centre and various Chinese institutions have brought the Belt and Road Initiative into sharp focus
Audience members experienced a sense of déjà vu during a session at Dubai Week in Shanghai, as Gautam Sashittal returned to the stage three times in order to sign a range of agreements that will have very real implications for the progress of the Belt and Road initiative.
Acknowledging his continued presence on stage, the CEO of Dubai Multi Commodities Centre (DMCC) expressed gratefulness for the collaborations, as well as hope that this would pave the way for further bilateral trade between the UAE and China.
The first of the partnerships was that of the Dubai Gold and Commodities Exchange (DGCX) and the Shanghai Gold Exchange (SGE). DGCX obtainined a license from SGE to list Shanghai Gold Futures in Dubai, using the Shanghai Gold Benchmark Price.
As the first yuan-denominated gold future product to be offered outside of China, “the contract will have far-reaching potential for those who want access to pricing that is fair and transparent,” commented Sashittal at the event.
“We have a clearinghouse to support this RMB-denominated contract, and this agreement adds value and deepens our economic development with Shanghai.”
The agreement is significant for cities that are both powerhouses when it comes to the commodity. China is the largest producer, exporter and consumer of gold in the world, and Shanghai in particular has become a core hub of the country’s market, with Chairman of the city’s gold exchange, Jiao Jinpu, giving the 2015 statistic of 34,000 tonnes on the exchange – making it the number one gold market for the ninth year running.
As for Dubai, “it is not called the ‘city of gold’ for no reason,” indicated Jinpu.
“Our creation of an international board in 2014 was for just this reason – to open ourselves up to international investors like this.”
After obtaining a license from Shanghai Gold Exchange to list Shanghai Gold Futures, Dubai’s Gold and Commodities Exchange next signed an agreement with Agricultural Bank of China (ABC) for it to become the first market maker for the Shanghai Gold Futures contract to be listed on its exchange.
China’s third largest lender by assets, ABC is also looking to expand its business footprint in the Middle East, added General Manager of Agricultural Bank of China (DIFC branch), Fang Min.
Coffee was the final point on the agenda, with the third agreement linking Mega Capital with DMCC, for the export of what could bring up to 130,000 tonnes of coffee beans from state-owned Yunnan State Farms Group in China, to Dubai.
Yunnan Province in China is a massive producer in the country, accounting for roughly 90 per cent of all Chinese coffee production. Chi Zhonghua, General Manager of Yunnan State Farms, indicated that this agreement would help greatly with gaining access to the much-desired Middle Eastern market.
As the Middle East region spends $6.5bn annually on the drink, with the UAE in particular seeing more than $544.5m spent on coffee in 2015, the move is a pertinent one.
Much like the agreements with ABC and the Shanghai Gold Exchange, will push forward the Belt and Road initiative by providing real bilateral trade that will open up the New Silk Road