The smart young women and coiffured housewives browsing for rings and
necklaces at a shiny new mall in a city on the Yangtze River could
breathe fresh life into China's boom in gold consumption. With jewellery stores already flooding shopping districts in Beijing
and Shanghai, retailers are shifting their focus to smaller cities in
hope of mining a rich seam of appetite for products which make up the
bulk of gold-buying in a nation eclipsing India as the No.1 consumer of
the precious metal.
A slower economy this year has weighed on growth in Chinese demand
for gold jewellery, with consumption in the first half of 2012 up less
than 1 percent on the year to 250.4 tonnes, compared to a 13-percent
increase in 2011, data from the World Gold Council (WGC), an industry
body, showed.
But the push into smaller cities and resilience in interest in gold will help demand growth accelerate again, analysts said. "I'd expect the total (jewellery sales) volume to grow at a
double-digit rate in the next three years," said Yuan Yuan Ji, an
analyst at Ji Asia in Hong Kong.
Appetite for gold in the world's most populous nation has underpinned
rocketing global prices for the precious metal, which are set to rise
for a twelfth straight year. Gold prices traded around $1,680 an ounce
early this week, down 13 percent from a peak above $1,920 hit last year.
"Growing demand from China, as well as central bank gold purchases,
the increasingly popularity of gold ETFs (exchange-traded funds) and
robust buying from India have been driving gold prices higher," said Shi
Heqing, an analyst at Antaike, a state-backed metals consultancy in
Beijing.
That should act as a shot in the arm for gold demand in the country,
which is likely to grow at about 7 percent in 2012, slowing from a
22-percent increase last year, according to figures from metals
consultancy GFMS, a unit of Thomson Reuters. Jewellery demand accounted for two thirds of Chinese gold appetite in 2011, with the rest taken up by investors.
If Chinese economic growth stabilises, jewellery demand in smaller
cities will grow by over 20 percent next year, Frost & Sullivan's
Zhao said, compared to 15-18 percent for tier 1.
Chinese cities are commonly assigned to tiers depending on their size
and importance. Although there are no official criteria for this,
Beijing, Shanghai, Guangzhou and Shenzhen are generally viewed as tier
1, while provincial capitals and a few affluent coastal cities are in
the second tier.
Hong Kong-listed Chow Tai Fook Jewellery Group Ltd, the world's
biggest jewellery retailer, said half the stores it has opened during
the fiscal year starting in April are in third and fourth-tier cities,
mainly concentrated in central and western China. "In the past two to three years, as well as in the first half of this
year, our retail outlets in tier 3 and tier 4 and in central and
western parts of the country have performed better than those in coastal
cities," said Kent Wong, managing director of the firm which competes
with the likes of Tiffany & Co and local players such as Luk Fook
Holdings Ltd.
