Photo: CFP

Industrial and Commercial Bank of China (ICBC) announced on Tuesday that its subsidiary ICBC Standard Bank will buy a precious metals storage business from Barclays in London, part of a move to strengthen the lender's business overseas.

The vault, which is in a secret location in London, is one of the largest in Europe. It holds 2,000 tons of gold and other precious metals.

ICBC Standard Bank will be the first Chinese lender to own a gold vault in London, according to a statement posted on the ICBC website on Tuesday.

This move is part of the bank's strategy to go global, and it will improve the bank's precious metals service, said an employee at ICBC, who declined to be identified when reached by the Global Times for comment on Tuesday.

Chinese banks aim to grab market share amid the withdrawal of Western banks such as Deutsche Bank, Barclays and Societe Generale from the precious metals market in London, Zhou Yinghao, a senior analyst specializing in gold at the Beijing Gold Exchange Center, told the Global Times on Tuesday.

The withdrawal is partly due to the aim to "simplify Barclays' operations and achieve our cost and capital reduction commitments," an official of the bank said in a statement on its website.

This deal will enable ICBC to provide a high-standard, one-stop service covering precious metals clearing, price setting, storage and risk management, said the statement released by the bank.

China is among the largest countries in terms of gold consumption and production, but New York and London still have a large say in the gold pricing.

In 2013 and 2014, gold produced by all countries surpassed 3,500 tons annually, while China produced and imported nearly 2,000 tons, accounting for over 50 percent of the global total, the People's Daily reported on April 20.

"But China is gaining a louder voice in the global precious metals market in recent years, in which banks like ICBC play an important role," Jiang He, a Beijing-based fund manager, told the Global Times on Tuesday.

The Shanghai Gold Exchange is one of the biggest exchanges globally in terms of business volume, making China stronger in the global precious metals market, according to Jiang.

Zhou agreed, saying that this deal will enhance China's status in the global gold market, as it helps China understand the rules of the game in the Western gold market and enhances Chinese banks' risk management ability.

It's likely that other domestic banks will follow ICBC's lead, with the aim of expanding their business overseas, said Jiang, the fund manager.

Zhou said Chinese banks have shown great interest in the gold market in London.

For example, ICBC, Bank of China and Bank of Communications joined the gold benchmark-setting process of the London Bullion Market Association in 2015.

China Construction Bank joined the silver benchmark-setting process in 2016.

Last week, ICBC joined the London Previous Metal Clearing system.

"ICBC's success in getting the [vault] deal will set a good example for other Chinese banks," said Zhou.