China's central bank said on Friday it had agreed in principle that foreign banks operating in the country could be enrolled as members of the Shanghai Gold Exchange (SGE). According to industry analysts the move marks the opening of China's gold market, the state-run new agency Xinhua reported.

"It will help combine the domestic and overseas gold market, increase the market liquidity and reduce transaction risks," said Zhou Hongtao, a gold investment analyst.

Zhou said the foreign members would bring advanced trading and managerial experience and contribute to levelling off the price gap between domestic and overseas markets. The central bank has told the SGE to set up a regulatory plan for qualification of foreign members and submit the plan to the central bank for approval.

The central bank said the plan would be put on record with the State Administration of Foreign Exchange along with the results of foreign members’ qualification examinations submitted by the SGE.

An official with the SGE said that, so far, several foreign banks including HSBC and Standard Chartered Bank had contacted the exchange.

The SGE, currently consisting of 150 members, is approved by the state council and founded by the People's Bank of China. It is a non-profit and self-managing legal entity which organizes gold, silver and platinum transactions.