The country’s own deposits may be costly to explore but Chinese mining giants are taking advantage of ‘New Silk Road’ connectivity to explore additional sources as Beijing looks to close the gap on US reserves
China’s demand for investment-grade gold is going up. The first quarter of 2017 saw a 60.2% rise in demand for physical gold bars, compared to 22.4% growth for the year-earlier period.
Recovering from a 14.4% decline during the same period last year, demand for gold jewelry rose just 1.4%, which is to be expected when demand for gold bars and bullion is high. This year, total Chinese gold imports through Hong Kong are set to breach 1,000 tonnes, compared to 771 tonnes imported in 2016.
The rise comes as no surprise. China has long been interested in accumulating gold to diversify its assets and reduce its dependency on the US dollar. In addition, a larger gold reserve strengthens the renminbi as an IMF reserve currency. In a time of economic slowdown, renminbi depreciation and concern over equity and property markets, however, citizens and businesses also view gold as a safe haven investment.
It is hard to pinpoint the exact amount of gold in China’s reserves, because the state considers gold a “strategic asset.” The government does not publish gold trade data, and the central bank has a record of making deceptive statements regarding the country’s gold stockpile.
Nonetheless, the World Gold Council estimates China’s 2016 gold holdings to be 1,843 tonnes — a figure that could very well be higher. More than 1,300 tonnes of gold were imported in 2016 and domestic production was 453 tonnes. Consumer demand was estimated to be 975 tonnes and institutional demand 778 tonnes.
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