What To Make Of Fanya?
First and foremost, the exchange appears to function as a very useful domestic price support mechanism for various minor metals produced in China. Throughout Zhang's presentation, she returned again and again to the theme of Fanya providing a way in which the "true" value of various metals could be realized. (The individuals quoted above confirm this.)
Can individuals really take their metal holdings "back home" and pop them under the bed? I doubt it somewhat, especially if they hold only 100 grams of this or that metal. And, as a corollary to this, when it comes to selling, I can't see who would be on the other side of the deal, especially in a falling market.
Indeed, the fact that no information was forthcoming from Zhang on the split between institutional and individual membership and/or trades makes one wonder whether it is small-time individuals who are being targeted as investors. And if they are, and something goes wrong and they come to harm, what may the effects be on the minor metals trade? (One need remember that this is China, where the concepts of culpability—especially that of government officials—and individual rights are not necessarily the same as they are elsewhere.)
And what's the government's involvement? The exchange must certainly have its, if only tacit, approval. Trade in such metals is too important not to come under the purview of at least some part of the administration.
This could lead one to cynically surmise that the exchange and the stocks of metal it "holds" are actually a nifty way for China's State Reserve Bureau to complement, with "buffer" stock financed by exchange members, the country's national stockpile of such metals.
In times of national emergency, who knows if the government would not see its appropriation (with or without compensation) of these metals as perfectly justified? And in a crashing market, what easier way to pick up such metals at fire sale prices?
But I am probably being too cynical and, "[w]ith the real estate industry market going down," the exchange does, simply—for Chinese investors anyway—offer an excellent investment alternative. Hey, Thomson Reuters, Bloomberg and Metal-Pages either are, or will soon be, carrying Fanya data.