Friday, 17 August 2012

China's hunt for Gold

Interest in gold miner African Barrick, and others, from China.

Reports in the Wall Street Journal, the FT and the source in Qiushi Magazine, a Chinese Communist Party Central Committee academic journal communicating ideology to officials are linked below.

Internationalisation of the Remnimbi is clearly happening and China see Gold as having an important place in that. FT Alphaville have discussed this as part of the US Dollar / safe assets "shortage" forcing use of the Remnimbi. Others view this as a strategic aim for China's rise to power.

The Gold "community" have long referred to the importance of Chinese purchases. The fact widespread ownership is government policy puts a strong support behind the gold price; can a "command" government "allow" it's population's investments to crash? Relatively small values of purchases, especially central bank purchases can have a large impact in the gold market. Devalution of currencies against gold was arguably the "solution" in the Great Depression about 4 years into the crisis in 1933. We are 4 years on from 2008......
we should encourage Chinese companies to go overseas and explore resources in other countries to broaden the channels of increasing gold reserves.
“As gold is a currency in nature, no matter if it’s for state economic security or for the acceleration of renminbi internationalisation, increasing the gold reserve should be one of the key strategies of China.”

A brief FT article

The long source article by Sun Zhaoxue, the head of China National Gold Corp regarding the national gold strategy.
With the help of Google Translate ..... still a bit tricky in in full

Build a strong China's economic and financial security barrier

- Actively build and implementation of the national gold strategy

Published: 2012 08 01 09:00 
Source: "Seeking Truth"    No.: 2012/15    : Sun Zhaoxue
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  Gold because of its inherent value, both the cornerstone of the national credit currency, the world's strategic resources. Looking at the world economic powers, without exception, gold strategy was developed and implemented at the national level. China is the world's second largest economy, in a relatively short period of time to quickly enhance the core competitiveness, an important aspect is that the science to build gold exploration, production, trade, consumption, and investment integration policy system, strengthen the state of this strategy control over resources effectively in the globalization process to maintain the country's economic and financial security, and enhance the ability to resist external shocks.
  A new understanding of the status and role of gold reserves, from a strategic height
  The last century, after the disintegration of the Bretton Woods system in the 1970s, the implementation of the century collapse of the gold standard, gold dollar hegemony under the influence of the stabilizing effect of the economic and financial by people of widely questioned, "golden useless" began to spread around the world. Many people think that gold is no longer the monetary base, storage gold reserves will increase costs. So, in some countries the central bank began selling gold reserves, gold prices continued to slump. By this point of view, our world's largest gold-producing countries began a trend of slow growth in gold reserves.
  In fact, since the discovered gold, its stability and the scarcity of it has become an important means that people exchange labor measure of value and wealth reserves. With the deepening of the global economic integration, as an important international reserve asset, gold in stable social economy to protect against inflation, and improve the national credit, stabilize the exchange rate, but also with the special status of the other financial assets are irreplaceable.Especially since the outbreak of the international financial crisis, the gold hedge against inflation function to highlight the growing strategic position of its wealth reserves get the world's attention again, central banks began to net purchases of gold. Currently, more and more people recognize that, "gold is useless contains too many lies, in fact, with over 74% of the official gold reserves of the United States to suppress the other currencies in order to maintain the the dollar hegemony design of a The "smoke". Tracing the source, the U.S. dollar and the pound, and later the euro was able to be increased by a single national currency as the currency of the world or the region, because of the huge gold reserves of these countries do support.
  In particular, it is worth noting that in the process of the international financial crisis, the United States appeared a huge budget deficit, but it is not utilized gold reserves to reduce debt, but printing money, a huge amount to increase the supply of dollars to the devaluation, so those The wealth of countries and regions of the U.S. dollar as the main reserve currency is shrinking fast, so as to achieve the purpose of automatic debt reduction. In stark contrast to the sharp depreciation of the U.S. dollar, the international price of gold continued to rise in 2011 exceeded 1,900 U.S. dollars / ounce, gold assets should be preserved function and its impact on the credit risk of depreciation of assets hedge function head. Natural, more devaluation of the dollar, the more the price of gold rose more obvious hedging role of America's huge gold reserves. Hotbed of the international financial crisis in the United States, but the crisis failed to shake the status of the dollar as an international currency, the net wealth of the United States and not with the dollar and the same degree of decline, an important reason is that 8133 tons of gold reserves in the United States in play a role. In the face of the global financial crisis on the world political and economic game, we once again clearly see the gold reserves as a special important role in financial stability, national economic security "anchor".
  After 30 years of reform and development, China has become a highly open countries, not only with hot and cold with the world economy, and changes in the world economic structure plays an increasingly important role. Therefore, for the win after the international financial crisis has brought new changes and new challenges, in particular, effectively advancing the process of internationalization of the RMB, in addition to have large economies of scale support, the country should also have to gold reserves as the important parameters can not be ignored , efforts to achieve a reasonable proportion of the gold reserves of the total economy. This requires that we judged the prospective size of gold reserves, build and implementation of the national gold strategy appropriate to the scale of China's economic development as soon as possible.
  II is the main channel for China to increase its gold reserves to increase domestic resource integration efforts
  Since gold natural currency, either starting from the protection of national economic security, or to accelerate the process of internationalization of the RMB to increase its gold reserves should become the core of one of the pillars of China's development strategy. International experience shows that the general national gold ownership accounted for 10% of foreign exchange reserves in order to safeguard financial stability at the same time to achieve high economic efficiency. Currently, the share of the gold reserves of the United States, France, Italy and other countries accounting for foreign exchange reserves are at about 70%. Since the beginning of the new century, China increase its gold reserves in 2001 and 2003, from 394 tons to 500 tons and 600 tons to 1,054 tons, after the outbreak of the international financial crisis, but still accounted for the proportion of foreign exchange reserves of gold reserves less than 1.6%, the gap with the developed countries.
  Of course, due to the large scale of China's foreign exchange reserves, the short term, like Europe and the United States as the gold reserves to become the main channel of foreign exchange reserves. Especially in the current international price of gold hit record highs, but also difficult to increase gold reserves. Always advisable Looking at the amount, we need to develop a clearer national gold strategy, from the long-term interests to take full advantage of the two markets and two resources, sustained bigger scale of gold reserves, and gradually become commensurate with its economic strength, the gold reserves of the country . From the current conditions, in addition to increasing reserves and gold through the international market to choose the main channel of the implementation of the national gold strategy should be to increase domestic gold resource integration efforts and increase gold production and its rational use to do a large reserve scale, build a strong all-round the process of opening up the country's economic and financial breakwater.
  Entering the new century, under the guidance of the scientific concept of development, China's gold industry ushered in a period of accelerated development, in one fell swoop to get rid of a depleted Golden State hat. From 2007 to 2011, China's gold production for five consecutive years, ranking first in the world, and established a complete gold industrial system, strong support for the implementation of the national gold strategy. But together, China's gold industry, there are still many inadequacies, such as mines generally smaller scale, less proven reserves dispersed mineral rights in the comprehensive utilization of resources, the development order, environmental protection, and other aspects of unbalanced development, mine enterprises Scattered and other issues are particularly prominent. The statistics show that the counties and cities as well as the area of ​​mining for gold in China reached more than 500 in 2011, a total of more than 700 gold mines, the average yield per seat is only about 0.5 tons. The world's largest gold producer, Barrick Gold Corporation, Canada, 2011, gold production amounted to 239.5 tons.
  In view of this situation, in recent years, China is also constantly increasing the gold resource integration efforts. But because China has long been a lack of strategic planning, development of gold resources and gold "bull market" in recent years, the wealth illusion, a variety of social capital have been involved in the mining areas. To fundamentally solve these problems, the need for national upgraded to gold and oil and energy as important strategic resource height from the whole industry chain to develop the industry's development planning and resource strategy. To strict industry access, from the technical, financial, security and environmental protection improve the access threshold of the exploration and development of gold, from the source to improve the efficiency of the development of gold resources; Second, to further improve the mining rights management, intensify the integration of resources, further develop and expand the gold exploration and development of body, promote the concentration of resources to the advantage of companies to achieve economies of scale; Third, to encourage with the backbone of the international competitiveness of enterprises to participate in international division of labor, to avoid the loss of our country in the world due to the low concentration of the domestic industry should have the right to speak on the gold market.
  In addition, as an important component of the system of national gold reserves, China should also encourage the the personal investment demand for gold. Practice has proved that private gold reserves is an effective complement to national reserves, is very important for the maintenance of the country's financial security. World Gold Council statistics show that Chinese folk per capita less than 5 grams of gold, compared with the global per capita of more than 20 grams gap significantly. This shows that the space and the potential of our the gold folk reserves the.
  Third, committed to a proactive strategy of the implementation of the national gold
  China National Gold Group Corporation was established in early 2003, is China's largest gold production and sales enterprises, is only in the gold industry, the central enterprises. 10 years, under the guidance of the scientific concept of development, China National Gold Group always adhere to the stronger and excellent enterprises and prevent financial risks, and serve the overall interests of the country as a primary task, is committed to promoting China's gold industry from exploration, mining, processing, consumption, investment full coordinated development of the industry chain, made due contributions to the healthy development of China's gold market and the effective implementation of the strategy of the national gold. In 2012, the total asset size of the China National Gold Group will be over 60 billion yuan, sales revenue will exceed 100 billion yuan. Currently, the Group has a daily processing production capacity of 150,000 tons of ore, the business scope covers the entire gold industry chain, has grown to become a leader in China's gold industry. Build national gold strategy, we should effectively act as the central enterprises responsibility to actively play a leading role in efforts to build the gold industry become important forces that support the smooth development of the national economy.
  Implementation of scientific and technological innovation, to push gold industrial optimization and upgrading. "Twelfth Five-Year" period, we will be targeting the gold industry, cutting-edge technology, and continue to increase investment in science and technology, the implementation of the technology-driven strategy to push gold industrial optimization and upgrading. At present, China National Gold Group has three R & D projects selected for the "12th Five-Year" National Science and Technology Support Program, and by the Ministry of Science and Technology commissioned a large gold-green mining Xuanye technology research and demonstration of the feasibility study, project organization and management units. "Twelfth Five-Year" period, China National Gold Group should play a leading role in major research projects, efforts to solve the constraints gold exploration, mining, smelting and other areas of industry challenges through independent innovation and integrated innovation, continuous improvement of the comprehensive development and utilization of mineral resources capacity. The same time, to the construction of key projects as an opportunity to improve the capability of independent innovation to the revitalization of the national equipment manufacturing industry as its mission, and explore mining companies and equipment manufacturing enterprises "win-win" cooperation model, take the initiative to support the localization of major equipment, mining equipment manufacturing industry .
  National commitment to the important task of increase national gold resource reserves. "12th Five-Year" period, China National Gold Group should firmly seize the resource lifeline prospecting increasing reserves, merger integration, base construction, development of offshore gold resources, accelerate the national gold resource reserves. The one hand, in order to make full use of their own research and talent advantage, centralized personnel, funds and equipment to carry out the exploration of the General Assembly war, fight to maximize the level of gold resource reserves in a short period of time; the other hand, we should actively seek local government support, increase resource integration efforts in the region, multi breakthrough scientific development, efficient development, as soon as possible to solve the problem of China's gold industry "small, scattered, partial, far" brought low resource utilization, environmental destruction. Recently, the China National Gold Group planned in the country on the basis of the 20 gold production base, accelerating the progress of the integration around the base ore for the early completion of a number of state-of-the-art technology, energy saving and environmental protection, annual gold production of 3-8 tons Benchmarking Enterprise . Actively implement the "going out" strategy, the development of offshore resources, broaden the channels of China's gold resource reserves.
  Advocate the possession of gold to the people "and guide the healthy development of benign. In recent years, China's gold market has developed very quickly, both for gold to play a variety of functions to create favorable conditions to accelerate the development of this industry has opened up a vast space. China National Gold Group to seize the favorable opportunity to expand the supply of scale at the same time, promote the implementation of the "golden people" strategy to actively extend the industrial chain, increase the varieties of gold investment, encourage and guide the rational investment, reasonable consumer. Important to fully take advantage of the country nearly 1600 "China Gold" stores, through measures to broaden marketing channels, improve the marketing network, strengthen brand promotion, etc., to effectively achieve "the gold in China", "possession of wealth to the people," the gold strategic goals.
  Current world economic turmoil, still in accumulation of factors of instability, uncertainty still increases. Face many new changes in the world economy, new challenges and new opportunities, from a strategic new understanding of the status and role of the gold, early construction and implementation of the national gold strategy, to enhance our ability to deal with complex situations.Only in this way, in order to promote the scientific development of China's gold industry, accelerate the realization of the gold power across a Major from the gold.
  (Author: General Manager of China National Gold Group, president of the China Gold Association)
Editor: Wang Zhaobin website edit: Qiaoxue,
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