China’s gold imports surge to record high as appetite increases, middle class seek wealth security

China imported a record high 1,447 tonnes of gold for non-monetary use last year, with the value increasing ninefold from three years ago to US$90 billion
China’s middle class are seen to be attempting to preserve their dwindling fortunes caused by the property market crisis and slumping stock market

China's economic recovery

Mia Nulimaimaiti

Published: 3:21pm, 26 Jan 2024

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China’s appetite for gold rose to record high levels last year, as investors sought to secure their assets and limit uncertainties caused by a weak yuan, an ongoing property slump and fears over a stock market rout.

Imports of gold for non-monetary use – products including gold jewellery – rose to 1,447 tonnes last year, breaking the previous record of 1,427 tonnes in 2018, according to the General Administration of Customs.

The weight marked a sevenfold increase from 2020, while the US$90 billion value represented an almost ninefold increase from three years ago.

Domestic sales in China also hit 1,090 tonnes of gold last year, according to the China Gold Association, with gold jewellery consumption increasing by 7.97 per cent year on year and purchases of gold bars and coins increasing by 15.7 per cent.

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Chinese consumers sell off old jewellery amid record high gold prices

With limited access to overseas assets, China’s middle class are seen to be attempting to preserve their fortunes, which have dwindled amid the slumping property market.

“Facing the property and stock market slump, global geopolitical instability, and the fall of the Chinese yuan’s exchange rate, gold purchasing is currently the best way for Chinese residents to preserve their wealth,” said Peng Peng, executive chairman of the Guangdong Society of Reform.

Peng predicts the gold rush would probably cool down this year, as local governments are introducing market-friendly policies, while the yuan exchange rate is also showing signs of stabilisation.

China’s stock market has faced a prolonged sell-off in the past year, grappling with lingering property and deflationary risks, and a decline in foreign-direct investments, leading the benchmark CSI 300 index to hit a five-year low this week.

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The stock markets in mainland China and Hong Kong, after reaching their peaks in 2021, have since seen a collective loss of over US$6.3 trillion in market capitalisation.

China’s offshore yuan has also depreciated by more than 1 per cent this year, following a fall of nearly 3 per cent in 2023, according to Bloomberg.

Most Chinese individuals are unable to buy US dollars or US dollar-denominated products to hedge against yuan depreciation, meaning buying gold – including bars and jewellery – as the most accessible means to safeguard the value of their assets.

The lack of investible assets have fuelled Chinese consumers’ gold demand in recent years

Gary Ng

“Beyond the pent-up demand from reopening, a weak [yuan] and the lack of investible assets have fuelled Chinese consumers’ gold demand in recent years,” said Gary Ng, a senior economist for Asia-Pacific thematic research at Natixis.

“As households stay cautious about income outlook and the [US dollar] weakens, China’s gold consumption will decelerate and grow at a milder rate in 2024.”

The gold rush pushed prices in China to 13-year highs last year, and widened the spread with the overseas market to the largest in a decade.

The spot price of gold in China stood at around 477 yuan (US$67) per gram on Thursday, resulting in a 3.71 per cent gap between domestic and international gold prices.