WIC Template
Total Page：16
File Type：pdf, Size：1020Kb
1 Talking Point 4 The Week in 60 Seconds 5 China and the World Week in China 6 Rail and Infrastructure 7 Economy 9 Energy and Resources 10 Healthcare 11 Chinese Character 13 China Consumer 18 February 2011 14 Society and Culture Issue 95 17 And Finally www.weekinchina.com 18 The Back Page China’s golden age m o c . n i e t s p e a t i n e b . w w w y b g u in China’s set to become the world’s biggest buyer. Will it drive gold prices higher? o k y n o a t B s t l t h a e g b k u o r o l a r G M B C d B n S a H Week in China Talking Point 18 February 2011 Gold rush Worried by inflation, Chinese discover the lure of gold ust like the Indian marriage sea- Json – late summer and autumn – the Chinese New Year typically in- volves a lot of gold purchases. Making headlines this year was one particular gift: the son of a wealthy businessman in Nanjing who spent Rmb600,000 ($90,000) on a bouquet of roses made of gold as part of a marriage proposal to his girlfriend. Some complained that the gift spoke volumes on the coun- try’s growing wealth disparity. But others thought that the young man showed foresight: “While real roses lose their value in a week, the value of gold – at the rate it has been going – will only go up,” says the Manager’s Daily. “Who knows, the gold roses might be worth The ultimate in anti-capitalist bling: a gold bust of Chairman Mao Rmb660,000 next week!” As with many commodities, what up 96% year-on-year during the hol- Another key motivator: growing happens in China is having a signif- iday season. And it noticed a new inflationary pressures. Beijing an- icant influence on world prices for group of customers: “Many people nounced a 4.9% rise in the consumer gold, which have been going up on who speculated on the stock and price index in January on a year ago, rising demand. Already the world’s property markets are now buying above December‘s 4.6% increase. largest gold producer, China, is on gold,” an industry insider told China Chinese investors, in common with track to surpass India as the world’s News Service. “They think it’s safer their counterparts in the West, are largest gold consumer this year. to buy gold these days.” turning to gold in their portfolios as Investment demand is now a big a hedge against what are effectively An appetite for all things gold? driver, with many Chinese drawn to ‘negative’ real interest rates (for bank Jewellery has conventionally ac- it as a store of value rather than as deposits). As inflationary expecta- counted for the lion’s share of de- an adornment. One factor is grow- tions grow, so will gold sales. mand. According to HSBC’s precious ing uncertainty over property in- At the Shanghai Gold Exchange, metals strategist James Steel, con- vestment, as the government tries trading volumes increased 43% to sumption of jewellery makes up 50% out different approaches to rein in 5,015 tonnes in the first 10 months of Chinese gold purchases and has prices. “Investment is really driving of 2010, exchange Chairman Shen grown at an average rate of 6% per demand for gold,” Cai Minggang at Xiangrong told Xinhua. Gold fu- annum for most of last decade. If the the Beijing Precious Metals Ex- tures trading on the Shanghai Fu- strong retail sales during the Lunar change told the Financial Times. tures Exchange has soared as well. Photo Source: Reuters Source: Photo New Year are anything to go by, that “People don’t have any better in- China’s central bank has also number will go up further this year. vestment options. Look at the stock been stocking up on the metal of Beijing Caibai, a popular jewellery market, or the property market – Midas, with the Federal Reserve’s department store, said its sales shot you could make huge losses there.” loose monetary policy fuelling in- 1 Week in China Talking Point 18 February 2011 terest in gold as a hedge against the greenback’s decline. China’s State Administration of Foreign Ex- change (SAFE), custodian of the na- tional foreign exchange reserves, has accordingly been diversifying its holdings. SAFE revealed in No- vember that its gold ownership had increased to 1,054 tonnes since the last such announcement in 2003, when it held 600 tonnes. All this suggests that China as a whole is buying more gold than be- fore. Demand from the country’s two largest sectors – jewellery and investment – reached a combined total of 430 tonnes last year, says Xinhua. This has helped push prices up: gold rose about 28% last year. Al- though gold prices softened in Jan- Emerging Markets uary on the back of better economic Bond House Asia-Pacifi c Loan House data in the US, prices for physical gold in Shanghai have still been at a premium of about $20 per ounce over those in London, underscoring the tightness of the market. So who are the big beneficiaries of China’s gold rush? Jewellery retailers are riding the boom. Department store Caibai told Economic Information Daily that the first eleven months of 2010 saw its own sales reach Rmb7.2 billion, a 60% increase on the year before (Caibai also sells investment-type gold bars, which are reported as fre- quently being out of stock). Meanwhile, more gold-linked in- vestment products are becoming available. For example, investors can now buy gold-backed exchange- traded funds overseas (although in- vestors who buy shares in a gold ETF don’t ever see the real metal). Lion Fund Management, which is backed by the Sinochem Group, is the first to capitalise on the new opportu- nity. This month it reached its fundraising target of $500 million to launch the country’s first gold ETF, says Bloomberg. “We will be the first fund in China 2 Week in China Talking Point 18 February 2011 to offer an access to invest in over- seas gold-backed ETFs,” says Yang Zi, an executive at Lion Fund’s market- Planet China ing department. “Given the infla- Strange but true stories from the new China tionary environment we are in right MICROWAVE MEALS. British carmaker Bentley is prepared to go the extra now, Chinese investors have great mile in securing sales from China’s new rich, reports the South China enthusiasm for gold investments.” Morning Post. One Chinese client not only wanted to pick his car’s colour, but also asked if the Crewe-based company would add a microwave oven. How high could gold prices go? “He really liked eating instant noodles, and wanted to be able to eat them Plenty of people believe that the while riding in his car,” says Bentley China product manager, Rocky Lau. price of gold will continue to rise. The UK carmaker said it was possible. But by then the billionaire had One reason: continuing purchases second thoughts. “Still, it goes to show that whatever our customers dream from SAFE. Sun Zhaoxue, general up, we can make it come true,” says Lau. manager of China National Gold Corp, the country’s largest gold pro- alone. To put that in perspective, not ditional amount purchased by ducer, points out that SAFE’s gold much more than 2,500 tonnes of SPDR Gold Shares, the world’s holdings still trail countries like the new gold supply is mined annually largest gold-backed ETF, according US and Germany by some distance (plus a bit more becomes available to Xinhua. in tonnage terms, and only amount through recyling of gold scrap). So is it possible that prices will hit to a mere 1.7% of its $2.4 trillion for- Last year China’s gold produc- $1,400 again, as they did in Novem- eign reserves. tion actually hit a new record of ber? Reuters reports a brisk start to Another reason: demand for gold more than 340 tonnes – an increase sales this year, with ICBC, a leading jewellery will likely continue its of more than 8% from the year be- Chinese bank, selling nearly seven climb. In a report released by the fore, says the China Gold Associa- tonnes of physical gold last month, World Gold Council in October, tion. But it still wasn’t enough to almost half of its sales total for full China’s per capita consumption of keep pace with demand. Until re- year 2010. Yes, prices fell on global gold jewellery remained one of the cently, China was largely self-suffi- markets for most of January after in- world’s lowest when compared to cient, with imports of only 45 vestors took profits on last year’s other major gold consuming mar- tonnes in 2009. But almost five rally. But events in the Middle East kets, at 0.26 grams. If it were to be times that amount was imported in seem to have reversed the tempo- consumed at the same rate per the first 10 months of 2010, the Fi- rary decline, and gold was selling at capita as in India, Hong Kong or nancial Times reports. That was $1,375 an ounce on Wednesday. Steel Saudi Arabia, Chinese demand could easily enough to absorb all of the at HSBC thinks it could move higher increase by as much as 4,000 IMF’s gold sales last year, as well as again, forecasting prices could reach tonnes a year in the jewellery sector a much larger quantity than the ad- $1,550 per ounce this year.