Higher prices spur investment in bullion and mines, although jewellery sales dim
Gold demand, output heat up in China
December 5, 2006
By Helen Yuan
Shanghai - China was expected to use 17 percent more gold this year as investment demand had grown, the head of the China Gold Association said yesterday.
Gold consumption in China, which lags behind only India and the US, was expected to rise to 350 tons from 300 tons last year, Cheng Fumin, the chairman of the China Gold Association, said at a conference in Shanghai. Investment demand for bullion had risen, while gold jewellery demand had fallen because of high prices, he said.
Gold prices have risen 27 percent in the past year. They hit a 26-year high in May as investors sought to hedge against rising energy costs.
Chinese gold jewellery demand last year was 241.4 tons, Cheng said, adding that the share of bullion had risen to 15 percent of total demand from less than 10 percent.
China, the world's fourth-biggest gold producer, plans to attract foreign investment to the sector.
Cheng said the country's gold output might rise more than 10 percent next year. China produced 169.4 tons of the precious metal in the first nine months of this year, 8 percent more than a year ago, Beijing Antaike Information Development said.
Spurred by higher prices, the nation's gold industry lifted profit by 52 percent in the first nine months of this year, according to Antaike. China Gold, the biggest state-owned producer, is among companies inviting overseas investors to buy stakes.
Cheng, a former president of the company, said China Gold was holding talks with potential investors. Chinese firms would welcome foreign strategic partners, while keeping controlling stakes, he said.
Beijing eased restrictions on global mining houses in 2002, but China has been slow to attract investment.
Inefficiency in approvals, high taxation and unclear regulations had deterred investors, according to the China Mining Association.
Lu Wenyuan, the vice-chairman of the China Gold Association, said a new five-year plan would focus on industry consolidation by merging smaller producers into bigger units. - Bloomberg
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