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

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.

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Chinese consumers sell off old jewellery amid record high gold prices

Chinese consumers sell off old jewellery amid record high gold prices

“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.

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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.

“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 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.