PROFILE - CHINA'S GOLD INDUSTRY (OCT 1999)
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Oct 25, 1999 (Asia Pulse via COMTEX) -- **************************************************
A PROFILE OF CHINA'S GOLD INDUSTRY PREPARED BY ASIA PULSE ANALYSTS (UPDATED OCT 1999)
************************************************** OVERVIEW: The People"s Bank of China, the central bank, announced that the buying and selling prices of gold on the domestic market will be raised from Oct 10.
According to bank officials, the adjustments have been made in accordance with the price changes on the international gold market.
The buying price of gold will increase by 21.89 per cent to 85.20 yuan (US$10.26) per gram from the current 69.90 yuan per gram.
The selling price will rise by 21.88 per cent, to 86.90 yuan per gram from 71.30 yuan per gram.
The central bank has lowered gold prices three times before, in a move to narrow the gap between domestic and international market prices.
The officials said the use of price controls to adjust gold prices was actually a way of adapting gold prices to the market, and that this would have a positive effect on the gold industry and state-owned gold businesses in particular.
China"s 11-time adjustments of gold prices since 1993. (/TB) (Unit: yuan/g)
---------------------------------------------- Date Purchasing price Selling price
Purity)99.9% (99.9% Purity)99.9% (99.9% ----------------------------------------------
May 20, 1993 51.60 51.20 80.80 80.00 Sept 1, 1993 96.96 96.46 107.68 107.18
Aug 21, 1995 93.22 92.72 103.53 103.03 Feb 2, 1996 96.23 95.73 106.87 106.37
Jan 1, 1997 91.19 90.49 101.24 100.54 Jul 1, 1997 88.70 88.00 94.32 93.62
Feb 20, 1998 81.20 80.50 82.80 82.10 Aug 18, 1998 79.15 78.15 80.70 79.70
Oct 12, 1998 82.36 81.36 84.00 83.00 Purity)99.99% 99.95-99.99% )99.9% 99.95-99.99%
May 20, 1999 76.30 75.50 77.81 77.01 Jun 9, 1999 73.44 72.64 74.90 74.10
---------------------------------------------- (/TE) According to the State Administration of Gold Management, China plans to make adjustments in the gold sector over the next two to three years.
China plans to produce 175 tons of gold this year, almost as much as iut did in 1998, when output was 172.8 tons.
By 2000, the country intends to push asnnual output to between 180 and 200 tons. If the plan works, the output growth in 2000 will be three per cent, and the average annual output growth in the 1996-2000 period will be 6.6 per cent.
The sector in China has introduced market-oriented reforms to comply with the development of the market economy in 1998.
Consequently, other industrial sectors have been allowed to explore gold resources after gaining requisite approvals, and provinces with capital in hand can join in gold mining programmes in other provinces that have gold resources but lack funds.
At present, about a third of 1,200 gold firms are losing money while the average output is less than 100kg.
China is considering opening the gold sector wider to foreign investment, which is usually limited to the development of low-grade and refractory gold resources, resulting in stagnant co-operation.
Wang Dexue, director of the Gold Bureau of the Ministry of Metallurgical Industry, warned gold firms to prepare for another price plunge in 1999 on the domestic market, which is currently under great pressure from the international market.
The People"s Bank of China, the central bank, is unlikely to maintain the protective price of 2,737 yuan (US$329.80) per ounce in 1999.
Gold, as a fiscal reserve, is all purchased by the Chinese central bank at a fixed price.
China"s gold industry has grown at an annual rate of over 25 per cent since 1990.
KEY INDICATORS: China turned out 15.06 tons of gold in July of this year, 63 per cent of the annual planned target, but 1.4 per cent or 1.29 tons less than it did a year earlier.
The total output of gold reached 2.3798 million taels in the first seven months, falling by 4.5 per cent year-on-year.
Among those registering increases in gold production were Shandong, Henan, Shaanxi, Xinjiang, Guangxi, Hubei, Anhui, Qingdao, Shanxi, Guangdong, Fujian, Jiansu and Dalian; and those showing decreases were Hebei, Heilongjiang, Liaoning, Inner Mongolia, Jilin, Gansu, Hunan, Guizhou, Sichuan, Yunnan, Jiangxi, Qinghai, Beijing, Zhejiang, Tibet, Ningxia and Hainan.
Industry insiders said gold output fell because an increasing number of enterprises stopped or cut output due to falling prices and poor resources grades.
The China Gold Corporation generated 15.86 million yuan in profits in the first seven months of this year, reducing 56.73 million yuan in losses from a year earlier, when losses amounted to 40.87 million yuan.
The Corporation has 17 enterprises, eight joint ventures and four subsidiaries. Their expenditure on management declined by 3.55 per cent year-on-year.
Between January and July the corporation"s mining enterprises and joint venture companies sold 216,360 taels of gold.
Output and sales of the Corporation between January and July:
(/TB) ---------------------------------------------- Output Sales (Tael)
---------------------------------------------- Total 216,360 204,857
Enterprises directly under Corp 146,507 134,961 Joint ventures 69,853 69,896
Subsidiaries -- -- ------------------------------------------------
(Unit: 1,000 yuan) ------------------------------------------------ Sales Income Sales Cost
------------------------------------------------ Total 1,034,940 829,770
Enterprises directly under Corp 564,230 468,930 Joint ventures 439,250 331,750
Subsidiaries 31,460 29,090 ------------------------------------------------
(/TE) Gold output by locality between January and August. (/TB) (unit: tael)
---------------------------------------------------- Region Output Completion of Year-on-year
yearly plan (%) change (%) ----------------------------------------------------
Total 2,800,893 68.5 -5.3 Shandong 761,791 77.7 7.1
Henan 365,186 76.1 4.4 Hebei 191,188 65.9 -20.2
Shaanxi 241,648 66.0 8.4 Heilongjiang 107,073 56.4 -29.1
Liaoning 150,992 81.2 2.3 Inner Mongolia 88, 810 54.8 -26.1
Xinjiang 125,190 77.8 14.0 Jiling 69,195 55.4 -19.4
Gansu 76,837 33.4 -39.3 Hunan 67.248 53.8 -30.1
Guangxi 44,388 49.3 -3.1 Guizhou 37,741 53.9 -25.7
Hubei 47,541 79.2 5.3 Anhui 52,295 87.2 22.5
Sichuan 30,871 56.1 -45.4 Yunnan 39,562 68.2 -10.6
Qingdao 46,633 116.6 47.0 Jiangxi 36,783 76.6 0.3
Beijing 12,486 62.4 -57.2 Shanxi 25,681 85.6 28.7
Qinghai 40,642 67.7 -35.6 Zhejiang 14,022 70.1 -14.7
Guangdong 23,708 74.1 5.0 Fujian 68,939 86.2 92.1
Tibet 12,951 43.2 -29.0 Jiangsu 4,291 143.0 24.7
Dalian 3,445 86.1 27.0 Ningxia 1,577 52.6 -31.6
Hainan 12,178 40.6 -57.7 Tianjin -- -- --
-------------------------------------------------- (/TE) Data from the State Bureau of Gold Industry show that 27.9 per cent of Chinese gold enterprises were in the red between January and April.
The recent downward adjustments of gold prices are expected to deprive the sector of over one billion yuan of revenue this year.
China"s gold reserves amount to 397 tons, accounting for less than three per cent of China"s more than $140 billion in of foreign reserves.
Per capita consumption is only 0.2 grams of gold a year, 1.3 grams less than the world average, while that in Hong Kong and Taiwan is nine grams.
China has about 340 licensed processors and wholesalers and about 10,000 retailers in the gold business. There are over 1,200 gold mines in China, many of which are instances of low-level duplication that waste resources.
OUTLOOK: China"s gold industry will make every effort to produce 175 tons of gold in 1999, a rise of only 1.5 per cent from its output a year earlier. This contrasts sharply with an annual output growth of about 10 per cent since 1974.
The industry expects to earn a profit of 1.2 billion yuan (US$140 million) this year.
The industry will form five conglomerates with processing capacity reaching 2,000 tons of minerals a day.
Annual gold output of each is expected to reach five tons. The sector targets a profit of 300 million yuan (US$36.15 million) for 1999, including 100 million yuan (US$12.05 million) earned from the application of new technology.
China will open the sector to other industries and dismantle boundaries of administrative regions, introducing a shareholding system and multi-channel investment mechanism.
The sector will follow a "steady progress" policy during an overhaul restructuring over the next two to three years.
China"s annual gold output growth in between 1996 and 2000 period is estimated to average 6.6 per cent a year against the 10.7 per cent during the Eighth Five-Year Plan period between 1991 and 1995.
Gold Management Bureau of the State Economic and Trade Commision has set targets for technical advances in gold processing enterprises for 1999-2000 period:
- To bring the annual production capacity to 200 tons; - To bring the geological reserves to 4,000 tons;
- To bring the annual output to 180-200 tons; - To bring gold consumption from 1:1.7 down to 1:1.5;
- To complete all key research projects. GOVERNMENT POLICY: Wholly foreign-owned operations on mining, dressing, smelting and processing of precious metals, including gold, silver and platinum families, are not allowed.
INDUSTRY CONTACTS: State Administration of Metallurgical Industry Address: 46 Dongsi Avenue (W), Eastern District, Beijing 100711.
Tel: 86-10-65133322 ext: 1317 Fax: 86-10-65133322 ext: 1317 State Bureau of Nonferrous Metals Industry
Address: Yi 12 Fuxing Rd, Beijing 100814 Tel: 86-10-68514477 Fax: 86-10-68515360
State Economic and Trade Commission Address: 26 Xuanwumen Xidajie, Beijing 100053
Tel: 86-10-63045328 Fax: 86-10-63045326 Sources: State Administration of Metallurgical Industry, State Bureau of Nonferrous Metals Industry, State Statistics Bureau, Gold Management Bureau of State Economic and Trade Commission.
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