EDITORIAL PAGE — The Great Wall is falling

The other “Great Wall” of China, by which is meant the half-century-old barriers to foreign investment, appears to be crumbling.

In its latest 5-year plan, the Beijing government has outlined plans to allow increased levels of foreign investment and reinforce regulations designed to protect investors.

Specific changes include opening up multiple channels for financing, introducing a system of gold loans, and possibly allowing more gold exploration at the grassroots level.

While gold is still collected by the Chinese government at a price 10% lower than the international market price, this is offset by the gold industry’s exemption from the 12% value added tax on all private businesses operating in the country. Also, joint-venture enterprises are now able to exchange foreign currency directly.

Over the past two years, some North American companies have begun working in China, but, until now, foreign interests have been restricted to low-grade, hard-to-extract gold resources. Better prospects are now up for grabs, however, and China’s hostility to foreign capital is clearly on the wane, all of which makes forays into Chinese gold exploration seem worth the gamble.

While its land mass is comparable to Canada’s, China has few large gold mines. This is not due to a lack of prospectivity; all but one of its provinces and autonomous regions contain known gold deposits, and the country’s total gold reserve is the fourth-largest in the world. Chinese gold has been found in a wide variety of geological environments throughout the country, though it is concentrated in Shandong Peninsula and Henan province.

Meanwhile, the vast, sparsely populated western part of the country has barely been scratched.

Last year, the country turned out 108 tonnes of the yellow metal, ranking it sixth among world producers. Moreover, government officials believe actual production exceeds the official number. This is not hard to imagine, considering that 93% of gold production comes from small mines, including hundreds of small vein deposits exploited by manual methods.

Chinese officials are eager to boost domestic production for several reasons, one being the country’s ever-increasing appetite for gold coins and bars.

Demand on the domestic market greatly exceeds production, forcing China to import hundreds of tonnes annually. Officials estimate that if one-sixth of the Chinese population was to consume one gram of gold per person per year, total annual consumption would hit 200 tonnes. Indeed, officials say actual consumption has already surpassed that figure.

The new rules for foreign-owned gold operations in China are bound to benefit some of North America’s more adventurous mining companies. Nevertheless, seeing how China has made, and then repudiated, terms for the return of Hong Kong by Britain, Canadian mining companies would be wise not to assume that a contract is a contract.

While we cannot overlook China’s long list of human rights violations, particularly its mistreatment of Tibetans and pro-democracy demonstrators, we applaud the government’s move to integrate itself more fully into the world of mineral exploration. It may be seen as a step toward harmonization with world standards of all kinds.