China - Jewellery Briefing

Briefing

In 2001, China was ranked as the third largest consumer of gold in jewellery globally according to GFMS, absorbing just over 180 tonnes (5.79 million oz). In the last few years, weaker economic performance, growing unemployment and competition from new consumer goods has impacted negatively on the strong fabrication and consumption growth of the 1990s.The main manufacturing regions are in and around Beijing, Shanghai and in the southern provinces of Guangdong and Fujian.

Traditional Chinese gold figurines (Source: RNA HOLDINGS LIMITED
Catalogue)

The gold jewellery market is still tightly regulated so that the supply and pricing of gold is under the control of the People's Bank of China, although in 2002 and 2003 the Bank's pivotal role in the market is likely to be reduced as the Gold Exchange in Shanghai gets off the ground. Historically, the official price of gold was typically at a premium over the international price, although at times the opposite has held true. In June 2001, the Bank began to set prices on a weekly basis, using the international market rates as a benchmark. As a consequence, the deviations in local prices compared to international levels have declined, although significant arbitrage opportunities do emerge from time to time.
Much of Hong Kong's manufacturing has shifted to the mainland China to benefit from the cheap labour and the enormous sales potential in the Chinese market.

The Chinese market is characterized by 24 carat Chuk Kam jewellery
(Credit: Timothy Green)

China's jewellery exports to the rest of the world are growing and are handled mainly through Hong Kong, accounting for over 10% of total production.
Gold jewellery consumption in Chinese domestic market, which in size ranks third in the world league after India and the US, was about 184 tonnes in 2001 (5.91 moz.) according to GFMS. Volumes have come down since the early nineties due to a combination of factors including freer markets for competing platinum and silver jewellery, increasing presence of diamond gold jewellery and the new availability of competing goods and services.

Source: Gold Fields Mineral Services

The Chinese market is still characterised by 24 carat chuk kam jewellery, a traditional store of value, although 18 carat is also available. In the cities, lower caratage jewellery, especially 18 carat gemset, is becoming increasingly popular. Strictly speaking, gold jewellery is subject to a 17% value-added tax and a 5% sales tax, while imported jewellery carries duties starting at 40% (although this is likely to fall as part of China's entry to the WTO) . However, in reality a substantial proportion of jewellery is sold unofficially and with no tax.
Wholesaling is still relatively undeveloped. Manufacturers usually sell direct to retail comprising state-owned department stores/shopping malls and specialised jewellery shops.