Rising production and profits enhance China’s gold powerhouse status
Gold production in China and the profits of Chinese gold producers have continued to see a major upswing this year. Given the manifold increase, China could also be well poised to become the world’s biggest gold market in 2012 as demand for the precious metal continues to surge. It actually overtook the world’s largest consumer, India in Q4 2011, although annual consumption remained below the latter’s figure for the full year.
China produced around 24.13 tonnes of gold in January 2012, an increase of 3.68% from the same month a year ago. In February this year, China’s gold output jumped 11.3% from January. Data shows that output for the first two months of the year rose 8% to 51.005 tonnes. In February, China produced around 26.87 tonnes of gold..
Analyst said China’s rapid economic development has completely changed the market for gold over the years. Its consumption was 203.1 tonnes in 2001, while in 2011 the figure had more than tripled to 769.8 tonnes according to the World Gold Council. Production on the other hand has also shown a massive jump. China produced a record 360.95 tonnes of gold in 2011, up 5.89% from 2010, making the country the world’s biggest gold producer for the fifth consecutive year.
Moreover, profits of Chinese gold producers have also surged 36.18% year on year to reach $304.76 million in January 2012. Data shows that the total gold output of the ten major gold companies was 13.65 tonnes in January, an increase of 1.27% and accounting for 56.58% of the national output.
China’s largest gold producer, the Zijin Mining Group, also reported an 18% increase in its net profit. In a statement filed at the Shanghai Stock Exchange, Zijin said net incomes rose to $906.35 million mainly due the rising price of gold.
While revenues surged 39% from a year ago period to 39.76 billion yuan, the company said the figure was slightly below its earlier forecast of 39.82 billion yuan.
Given the fact that global prices were buoyed by increased investment in gold, rising incomes in China have also meant that in addition to greater purchasing power for gold, citizens are turning to the precious metal as an investment and a store of value, especially given the weakness of the country’s real estate sector.
China has also been advised to increase its holdings in gold: A senior official was quoted by local newspapers as saying that China should further diversify its foreign exchange portfolio and make more gold purchases when the price slips.
“The Chinese government should not only be cautious of the imported risk caused by rising global inflation, but also further optimise its foreign exchange portfolio and purchase gold assets when the gold price shows a favourable fluctuation,” Zhang Jianhua, director of the research bureau affiliated with the People’s Bank of China has been quoted as saying.