China’s Securities Regulatory Commission has approved trading of gold futures on the Shanghai Futures exchange. This move deepens China’s commodities markets as one more commodity has been added to the five which already trade (copper, zinc, rubber, fuel oil and aluminum). Not only was China the third-largest gold producer last year, as a manufacturing power house, it is also a user of gold. A deeper gold trading market may also help China, at the margin, should it ever wish to increase its holdings of reserves in gold. While frequent trading in gold futures is unlikely to be a normal method of managing gold reserves, having a domestic gold futures markets would provide the Chinese with extra information about the state of the gold market and also provide an extra outlet for management of gold exposure, if required. Estimated at 600 tons, China’s gold reserves account for only 1% of foreign exchange reserves. Some have suggested that this should be raised to the 3-5% range, which would represent better diversification of foreign reserve assets.