GOLD: Producers target China - Financial Times, Wednesday June 16
By Gillian O'Connor Mining Correspondent
China is one of the gold industry's two primary targets for
marketing gold jewellery. True, it buys less than a quarter of the
gold India does - 192 tonnes in 1998 compared with 815 tonnes.
But it does have nearly a fifth of the world's population and a
strong gold-owning tradition.
Potential demand could be even bigger than in India,
given that the government has only just begun liberalising
the market, said George Milling-Stanley of the World
Gold Council at the FT Gold Conference yesterday.
Ouyang Wei, editor of China Money, agreed that China
had excellent long-term potential, but was less optimistic
about short-term prospects. He argued that imports were
still likely to rise in the short and medium term.
This is partly because the regulated domestic price is
likely to continue to lag behind the international price as
it falls, and partly because a slowdown in the growth of
domestic gold production will mean a growing gap
between local supply and demand.
Factors inhibiting demand growth include tough
regulation and taxes, a sluggish economy and consumer
reluctance to spend, and the fact that many of the
people who can afford to own gold already do so. In the
10 largest cities, half the population own gold jewellery.
In Guangzhou the proportion rises to 75 per cent.
Competing products, such as platinum and gem-set
jewellery, are also becoming popular. The rural
population, with no gold-owning tradition and no money,
is unlikely to become a large consumer. However, the
inefficiencies of the local gold mining industry could
benefit foreign producers.
Although China is fairly rich in gold resources, it is short
of proven reserves, partly because of wasteful mining
techniques and partly because exploration has lagged
production. In addition, many mines are unprofitable.
Now, as central planning gives way to a market-oriented
system, larger unprofitable mines are likely to be closed,
while very small-scale mines could fall victim to
increased regulation. As a result production is expected
to grow slowly or stagnate. |
