China set to overtake India as world’s biggest gold consumer


China, the world’s largest producer of gold, is set to overtake India as the metal’s biggest consumer for the first time in history.

China’s gold consumption in 2009 has now been estimated at 450 tonnes, according to data released this week. This exceeds estimates for India’s net consumption last year, which is forecast at around 380 tonnes, according to the Bombay Bullion Association.

Demand for gold from Indian consumers has plummeted in the past 12 months, with soaring gold prices and as a result of the economic slowdown. But in this time, consumption in China rose by 13.8 per cent. The Chinese Government has, in recent months, encouraged consumers here to invest in gold and silver. Officials in Beijing have also increasingly pressed the government to put more of the country’s vast financial reserves into procuring assets, primarily gold and oil, and away from dollars.

According to recently released statistics by the China Gold Association, the estimated demand for gold touched 450 tonnes last year, up from 395.6 tonnes in 2008.

“With household incomes increasing, Chinese consumers are buying more jewellery and investing in gold assets. All of these are boosting gold demand,” Zhang Bingnan, Secretary of the China Gold Association, told the State-run China Daily newspaper.

Soaring prices

Soaring gold prices have, in part, been driven by the Chinese Government’s increasing appetite for the metal. China has been the world’s largest gold producer since 2007, when the country overtook South Africa. China had an annual output of 282.5 tonnes in 2009, when production grew by 14.6 per cent.

Most of the domestic production has been consumed internally, and China has now accumulated what is the world’s fifth largest reserve of gold. In recent months, Chinese mining companies, many of which are State-owned, have also begun casting their net overseas. In November, Zijin Mining made a $498 million offer to take over Australia’s Indophil. The move was seen by analysts as part of a recent concerted push by Beijing to secure gold assets abroad.