Chinese put their faith in precious metal: The streets of the colony's shopping areas are paved with mainlanders in search of gold. Teresa Poole reports from Hong Kong

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The Independent Online
IN A gold shop in Hong Kong's busy Causeway Bay shopping centre, a 50-year-old government cadre from Anhui, one of China's poorest inland provinces, was deciding which gold ring to buy.

Two other men, both also in the open-necked, white acrylic shirt and dark trousers that mark out the Chinese mainlander in Hong Kong, had also just bought a ring. They said they were businessmen from Tianjin, in north-east China, and planned to spend about 5,000 Hong Kong dollars ( pounds 425) each on gold before going back home. 'If I had time, I'd buy more,' one said.

In the same little shop, a family of three on holiday from Shanghai were paying for their gold jewellery purchases with renminbi, the mainland currency.

The consumer gold rush of the Nineties is a Chinese phenomenon. And those mainlanders who are able prefer to come to Hong Kong to buy the yellow metal, either on business trips or on package tours. The streets of Hong Kong's shopping areas are paved with mainlanders in search of gold. Gold chains, bracelets and rings for everyday wear; dragon and phoenix bangles for weddings.

The traditional Chinese craving for gold has been given new impetus by the fast-growing consumer buying power on the mainland. Last year China became the world's largest gold consuming nation and the biggest purchaser of gold jewellery. At a time when China's inflation rate is rising sharply, and its currency sliding against the dollar, the customary Chinese faith in pure gold as the best way to safeguard one's wealth grows even more strong.

Last year, according to the authoratative Gold Fields Mineral Services's review of the industry, the mainland Chinese bought more than 350 tons of gold, about 10 per cent of world demand.

Jonie Lai, North Asia area manager for the World Gold Council, explained: 'Gold has always had a very special significance to Chinese people as a symbol of prosperity and happiness. Because of this traditional affinity, gold jewellery is generally considered the third most important purchase for an average Chinese household after colour television sets and refrigerators.' The official China Daily said last month: 'Gold ornaments are acting like magnets on people's wallets.'

The Chinese prefer pure gold. Chuk kam - soft, pliable 24-carat gold - accounts for about 80 per cent of the market and is bought either as jewellery or gold bars. Hong Kong offers lower prices and better design for gold jewellery, and lots of it. On the mainland, the shortage of finished products means there are often queues outside gold shops.

Kelly Knight, chief executive of Tse Sui Luen Jewellery, one of Hong Kong's biggest chains, said: 'Chuk kam is portable and valuable, so no matter what the government does to the currency, you can weather the storm. A lot of Chinese people, mentally, are still on the gold standard.'

Winston Chow, a director of the Chow Sang Sang chain of jewellery shops, said about 40 per cent of pure gold jewellery and bar sales in his Hong Kong shops is to mainlanders. Since last year his company has advertised on television in Guangdong and is set to extend this to Peking and Shanghai. 'Going back to the war, gold saved a lot of people. At that time, currency was worthless and the only people who could get out of China were those with gold,' Mr Chow said.

In March, China relaxed its currency export regulations and allowed mainlanders to bring 6,000 renminbi ( pounds 500) out of China, so now almost all Hong Kong's gold shops also accept the Chinese currency. There are two kinds of customers from the mainland, according to Mr Knight, private buyers and Chinese wholesalers, who buy up to HKdollars 2m of gold at a time to resell in China.

For the world gold market, all this gives huge scope to increase sales. According to the World Gold Council, gold sales per person in China were only 0.22 grammes last year, compared with nearly 10 grammes in Hong Kong and Taiwan. World gold prices have surged over the past few weeks, and analysts say demand in China has the potential to push prices up further. Mainland gold sales have quadrupled in the past four years.

Inside China, gold is a highly regulated business. All manufacture and trade is controlled by the People's Bank of China, and the price is set officially - usually well above world levels. And foreign companies are not allowed to sell gold inside China, except in partnership with a Chinese state firm.