Gold consumption in China could triple if deregulation is approved, according to a research report commissioned by the London-based World Gold Council (WGC).
The report, titled China’s Gold Market Reform in a new Era — Related Policy Research and Suggestions, examines production and distribution systems, and the possibility of establishing of a gold exchange market.
Kerr Cruickshanks, WGC’s director of international marketing, says deregulation would cause China’s annual gold consumption to triple within three years, to 600 from 200 tonnes.
In the first half of 2000, China consumed 102.5 tonnes of gold, exceeded only by India, the U.S. and Saudi Arabia.
“A liberated market in China will ultimately lead to increased gold consumption,” says Cruickshanks. “India’s market doubled within two to three years of deregulation.”
The report, compiled by economist Liu Shijin, was unveiled at the recent China Gold Economic Forum in Beijing. The event was attended by Chinese government officials and representatives of various companies, including AngloGold, the world’s largest gold producer.
The forum demonstrated strong support for deregulation.
“It was clear that [Chinese government officials] were committed to change and that deregulation, together with a relaxation of foreign exchange controls and current levels of taxation on gold, will lead to a rise in gold consumption,” says Ian MacDonald, vice-president of precious metals for Commerz Bank in New York, N.Y. and a speaker at the forum.
Earlier, the WGC, in its capacity as advisor to the People’s Bank of China (PBC), proposed partial deregulation of the Chinese gold market over two years, followed by liberalization of the domestic market and, finally, participation in the international gold market. The proposal is based on a study by the National Economic Research Institute of the China Reform Foundation.
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