2011-12-04

China’s efforts to encourage gold investment among its citizens have been particularly successful

China’s efforts to encourage gold investment among its citizens have been particularly successful over the past year.

Data from the Hong Kong government showed that China mainland imported approximately 140 tonnes of gold via Hong Kong between July and September 2011, above the 120 tonnes imported during the entire year of 2010, according to a report by Mineweb. Furthermore, the data revealed that gold purchases in China via Hong Kong reached a record 56.9 tonnes in the month of September, a 600% increase on a year-over-year basis.

The report also noted that “China has been encouraging its citizens to buy and hold physical gold, either in the form of jewellery, coins or bars. The Asian country also had widened the number of banks allowed to import gold and has been encouraging more gold investment through new exchanges and yuan denominated products. On June 28, China opened its first precious metals spot exchange.”

Additional highlights from the report include:

“China’s aggressive promotion has pushed Chinese consumer demand for gold up 25% overall this year – much higher than the 7% global average. This is a far cry from the position in 2002, before which Chinese citizens were barred from owning physical gold under penalty of imprisonment.”

“That policy was dropped and the Shanghai Gold Exchange came into being. In mid October, a new Renminbi kilobar gold was launched, the world’s first offshore yuan denominated spot gold contract. It started trading on Hong Kong’s Chinese Gold and Silver Exchange.”

“Taking this a step further, the Ministry of Industry and Information Technology in China has plans to reform the gold sector in China by eliminating smaller gold smelters. The Ministry also has said it will support international gold prices in the long run. At a national gold industry meeting on November 28, the Ministry said it planned to shut down certain gold producers with smaller ore processing capacities.”

“In a major turnaround and for some time now, the government also has been airing news programmes on state owned television urging consumers to buy and sell gold and silver. Moreover, analysts say when China expressed its interest in purchasing $80 billion in gold (about 2600 tonnes), it profoundly altered the gold market’s long standing synergy.”

“Analysts have said the country also has mounted an aggressive defense of its domestic gold mining industry. Its country’s rising middle class and growing affluence will ensure that China’s gold jewellery market nearly doubles to 955.2 tonnes by 2020, as compared with 519.6 tonnes in 2011, analysts added.”

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