How Much is China Gold Worth?

Industry insiders are calling for major changes in the pricing of gold jewellery so more people will buy it in China.

The sale of gold in general depends on the sale of gold jewellery, which holds the lion's share of the mineral's demand. The public cannot legally possess gold bullions as investments.

Gold jewellery has great potential, although industry insiders worry that it could fall out of public favour because strong internationally driven price fluctuations can undermine confidence in the metal.

But the current retail price structure restrains demand for gold jewellery under the central government's tight control on gold production and allocation, said Wayne Wang, promotion manager with the World Gold Council in North China.

Jewellery retail prices are set by the Price Administration of the State Development Planning Commission.

Jewellery processors and dealers are not allowed to price their products according to special features or variable market demand. Retailers get the same profit no matter what kind of gold jewellery they make or sell.

"Such a price mechanism significantly curbs the processors' gold jewellery product development," Wang said. "The processors are unwilling to produce more categories of products with high added-value."

This lack of incentive dampens the public's enthusiasm for buying Chinese gold jewellery.

Last year's demand for gold was 205 tons, an increase of 7 per cent over 1998.

A gram of gold jewellery now costs 100 yuan (US$12.05) to 120 yuan (US$14.46). Retail prices fluctuate in line with gold bullion prices set by the People's Bank of China, the country's central bank.

Wang said changes in the pricing are imperative to stimulate demand.

"The gold jewellery's added values should be separated from retail prices," he said. "The processors and dealers should be granted the right to price their products' added values."

Officials admit price reform is a pressing task for the central government.

Pilot reform has begun in East China's Jiangsu and Zhejiang provinces and in Shanghai, said State Development Planning Commission sources.

Beijing will become a pilot city this year, Wang added.



Please visit People's Daily Online --- http://www.peopledaily.com.cn/english/