China on Tuesday began a new international contract on the Shanghai gold exchange that allows the world's biggest producer and consumer of gold to increase its influence on the pricing of the precious metal. The new contracts are called Shanghai Gold and are fixed and traded in the yuan.

Prices for the Shanghai Gold contract will be fixed twice a day, once in the morning and once in the afternoon, several hours before the London fixing. Shanghai Gold trading in the evening will be extended to 2:30 a.m local time. Eighteen banks and bullion traders have been chosen as initial market makers for the fix, including 10 Chinese lenders, two foreign banks, and six domestic and international bullion traders. Shanghai Gold is in gold ingots with a weight of one kilogram and a fineness no lower than 999.9, delivered in Shanghai. The World Gold Council says the yuan price will be complimentary to the prices in London and New York, which are the two most active gold trading marketplaces in the world. The world's top producer and consumer of gold, China has long been pushing to be a price-setter for bullion to enhance its influence on Asian and global markets.

The prices in the Shanghai Gold Exchange, including the international version, are all set in RMB. As long as the exchange is located in China, we use the RMB to trade. So "Shanghai Gold" will lay the groundwork to expand the overseas market of RMB-priced bullion.

This is not the first time that the Shanghai Gold Exchange has tried RMB-based trading. It is the first time, however, that Shanghai trades will be based on a local gold fixing. Will the new "Shanghai Gold" really help China gain the pricing power it wants? Wan says it won't be easy.

Our imports and exports of bullion are limited for now, especially the exports. If we cannot guarantee bidirectional trades on the international market, it will be hard for China to gain pricing power," Wan Zhao, senior analyst of China Merchants Bank, said.

Although the People's Bank of China launched a series of policies to liberalize the import and export of gold bullion last year, physical movement of the gold can still only take place with a permit from the government.