SHANGHAI -(Dow Jones)- Foreign banks applying to be accepted as members of China's Shanghai Gold Exchange should be locally incorporated, exchange Chairman Shen Xiangrong said Saturday.

"A group of foreign banks have applied for a membership at the Shanghai Gold Exchange, but many of them are not qualified yet, as the central bank required a local incorporation status as a prerequisite," Shen said at a financial forum in Shanghai.

The exchange has approved Standard Chartered Bank (China) Ltd. and HSBC China Co., the locally incorporated subsidiaries of Standard Chartered PLC (LSE:STAN) . (STAN.LN) and HSBC Holdings PLC (LSE:HSBA) (HBC), to become its members, but the two banks haven't officially started trading yet, he said.

The People's Bank of China gave approval to the Shanghai Gold Exchange in mid- 2007 to accept foreign banks as members. Local media reported earlier that the exchange will likely accept HSBC (LSE:HSBA) , Standard Chartered, UBS AG (UBS) and Bank of Nova Scotia (NYSE:BNS) (BNS) as the first batch of foreign members.

Shanghai Gold Exchange, set up in 2001 by the central bank, is the only bourse that trades gold in China. China is the world's fourth-largest gold producer and third-largest consumer of the yellow metal.

-Rose Yu contributed to this story, Dow Jones Newswires; 8621 6120-1200; rose.yu@dowjones.com

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