Gold imports into mainland China from Hong Kong almost doubled to new high in 2012 as Chinese people continue to play catch up in terms of gold ownership. The Chinese were forbidden from owning gold for over 50 years.
Rising incomes, economic jitters and concerns about currency debasement and inflation in the world’s second largest economy led to increased demand in China which contributed to gold seeing another year of gains.
The very poor performance of the Chinese stock market in the last 10 years (see chart below) and concerns about property bubbles are also leading Chinese investors and savers to diversify into gold.
Mainland China imported a whopping 834,502 kilograms or 834.5 metric tons of gold, including scrap and coins in 2012.
This compared with about 431,215 kilograms or 431.2 metric tons in 2011, according to Bloomberg calculations based on data from the Census and Statistics Department of the Hong Kong government.
Imports in December 2012 rose to a monthly record of 114,405 kilograms, according to data from the department today.
The unrealised important fact is that the people of China were banned from owning gold bullion by Chairman Mao in 1950. This prohibition continued until 2003 and it means that the per capita consumption of over 1.3 billion people is rising from a very small base.
Since the market in China was liberalised, gold in yuan terms has risen by 259% while the stock market has performed poorly.
Even after the significant increase in demand seen in recent years – Chinese per capita gold ownership remains well below that of the levels seen in India.
Culturally, India is known to have the greatest affinity for gold in the world. China had a similar cultural affinity prior to the “cultural revolution” and in time its levels of gold ownership will likely rival those seen in India, Vietnam (see below) and other Asian countries.