Gold buying in China is not over – it’s just moved to a duty-free island and a new business center

Note that gold prices have rebounded to $5,161 per ounce after the dramatic collapse in January, with the center of the rebound clearly centered in China.

But this time, the problem has become more than just speculation. Beijing has adopted a coordinated move to strengthen the global gold market from its foundations.

Arbitration in Hainan

Hainan’s new zero-tariff system is designed to demonstrate China’s openness to foreign imports. The first numbers suggest that it is getting results – at least on the surface.

Hainan launched island-wide tariff-free operations on December 18. The nine-day Spring Festival holiday was the first big test. Overseas duty free sales reached 2.72 billion yuan ($390.8 million), up 30.8% compared to the previous year, with 325,000 buyers, according to Haikou customs data reported by. Moody Davitt reports February 24th. Momentum has been building since December. It has arrived January sales At 4.86 billion yuan ($693.5 million), an increase of 46.8% year-on-year, according to Xinhua.

Gold jewelry continued to be a primary attraction during the holidays. China Daily reported on the date On February 23 that zodiac-inspired pieces and investment-grade gold bars sold off the shelves even as prices returned to more than 1,500 yuan per gram. Moody Davitt’s report confirmed that jewelry and watches top the sales categories at CDF Sanya, the island’s main duty-free complex.

Global Times reported on the date February 25: Both major brands, Oppo Gold and Chow Tai Fook, launched bold promotional campaigns during the holidays, which included weight-based discounts and exemptions from craft duties. A chow tai fook seller in Beijing has confirmed an increase in the number of visitors and purchases.

Hainan’s price advantage has retained its significance. Reported by ECI Global In January The price of gold from Chow Tai Fook is about 1,250 yuan per gram in Hainan, compared to 1,430 yuan in the mainland. A 40-gram bracelet can save buyers 13,000 to 14,000 yuan after accounting for government subsidies.

This phenomenon points to something deeper in China’s consumer economy. When they get a tax break, middle class people don’t spend on luxury – they cover themselves with gold.

Hong Kong’s quest for global gold dominance

As individual buyers flock to Hainan, Beijing is playing a much bigger game. Joseph Chan, Hong Kong’s deputy minister of financial services, announced in the first gold trading session of the Year of the Horse that the government will make a “full push” to turn the city into a regional gold storage and trading center.

He launched an ambitious plan: expand Hong Kong’s gold storage capacity to more than 2,000 metric tons in three years, launch a fully state-owned gold clearing system with operational processes starting from the end of this year, and deepen coordination between the Shanghai Gold Exchange and the Hong Kong market.

Clearly define the goal – expand China’s market share and influence on international gold prices. Western financial centers have historically dominated this area.

This initiative goes beyond local ambitions. Many Asian countries have expressed their interest in storing sovereign gold at the Shanghai Gold Exchange as they expand in the opening of foreign treasuries. Cambodia’s central bank is expected to be an early user of the Shanghai Stock Exchange’s quarries, as it will be able to store some of its 54 tonnes of gold reserves in the Shenzhen customs zone.

Structural demand under speculation

The “Horrible January” report – gold falls 9%, silver collapses 26% in one day – exposes the state of excessive speculation. Individual traders were decimated by leverage, gold ETFs saw flows of nearly $1 billion in one day, and exchanges raised margin requirements.

The demand for physical gold in China is almost stable. Spreads on the Shanghai Gold Exchange widened to $30-32 per ounce over the London spot price even as global prices fell sharply. Bank deposit rates have collapsed due to expansionary monetary policies, the real estate market offers no recourse, and gold remains the most attractive option as a portfolio of value for households with limited other options.

Gold currently represents just 1% of Chinese household assets – compared to expectations of 5% in the near future – which means structural demand from the world’s biggest gold consumer is far from over. Now, Beijing is not only buying gold, but building the necessary infrastructure for the price.