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China's gold imports seen surging 50% as investors seek haven
[SINGAPORE] China, the world's biggest gold consumer, may boost imports through Hong Kong by about half this year as local investors seek to protect their wealth from currency risks, a slowing property market and volatile stocks, according to the Chinese Gold & Silver Exchange Society.
Mainland China is set to import about 1,000 metric tons from the territory in 2017, said Haywood Cheung, president of the century-old exchange in Hong Kong which trades physical gold and silver. That compares with net purchases of 647 tons last year and would be the highest since 2013, data from the Hong Kong Census and Statistics Department compiled by Bloomberg show.
Demand is rising on concerns over property, share and bond markets and the outlook for the yuan, amid a government drive to reduce leverage in the financial system. Local consumption was up 15 per cent in the first quarter, with sales of bars for investment climbing more than 60 per cent and dwarfing a 1.4 per cent rise in jewelry buying, according to data from the China Gold Association. China also imports gold from Switzerland.
"People are looking at other means to invest, a safe haven to protect their renminbi because of the depreciation, so everybody starts to look for safe haven products," Mr Cheung said in an interview at a precious metals conference in Singapore on Monday. "So I think we're going to have a good year." The Chinese Gold & Silver Exchange Society is planning to build a bonded warehouse in Qianhai, with a storage capacity of 1,500 tons of gold, and completion is expected in two to three years, said Mr Cheung, who has 33 years of experience in the industry. A temporary warehouse which holds about 50 to 100 tons of gold will be operational by the end of this year, he said.
The society has an offshore gold product, denominated and settled in renminbi, with current transactions of about 20 billion to 30 billion yuan daily, Mr Cheung said. This isn't good enough and one way to improve it is to build the warehouse to get in touch with the China market, he said. The Shenzhen region supports about 3,000 jewelry manufacturing companies which supply 70 per cent of the Chinese retail market, he said.
While the case for investment demand in China is reasonably "solid," jewelry demand will probably decline again this year in volume terms as the consumer spends money on other things such as property or travel, or prefers 18 karat instead of 24 karat products, said Philip Klapwijk, managing director of Precious Metals Insights Ltd.
"I suspect that jewelry demand will be down more in tonnage terms than investment will be up," Mr Klapwijk said on the sidelines of the conference organized by the Singapore Bullion Market Association. "So demand in China this year could be down a tad. Financial use of gold in China could also see some reductions."