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The World Gold Council has cautioned the Government that the gold jewellery manufacturing industry may move out to China if it does not take measures to institutionalise bullion trade in the country.
Launching the Council’s report on ‘China gold market: progress and prospects’, Somasundaram PR, Managing Director, WGC, said India has already lost its competitive edge over China in many sectors and gold jewellery manufacturing would also go the same way if the Government continues with curbs on gold imports.
“Though the shift of jewellery manufacturing from India to China has not reached alarming proportion, some of the jewellers are already weighing the option. China has proposed to set up a free trade zone for gold industry in Shanghai to attract foreign investment in bullion trade,” he said.
China, which toppled India to become the largest gold consumer, has given licence to two large banks – HSBC and ANZ – to import gold and ensure supply at the free trade zone. China is among the largest producers of gold with 600 operating mines producing 437 tonnes last year.
Asked whether India can regain its position as largest gold consumer if curbs are lifted, Somasundaram said India does not have a stated policy to achieve this milestone, unlike China.
“The Indian government policy control on the bullion trade limits with the import-export directives. While the RBI controls the 40 per cent of trade that happens in the banking sector, there is no clear cut policy for boost bullion trade,” he said.
In contrast, China recently launched a gold accumulation plan, which is similar to the one offered by jewellers in India, through the government-owned Industrial and Commercial Bank of China . It already has 10 million accounts. Nine months back, the country launched three gold exchange traded funds in addition to the vibrant Shanghai Gold Exchange and Shanghai Futures Exchange to arrive at a gold price in the Chinese currency renminbi.
Since the Chinese bank deposit rate is among lowest, the Government has created avenues for attracting investments. The Council expects gold demand in China to consolidate at 1,000 to 1,100 tonnes this year and touch 1,370 tonnes in three years with a conservative GDP growth estimate of 6 per cent. The country logged growth of 7.5 per cent last year.
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