Last Updated : 26 April 2009 at 20:40 IST
Gold: Why China outbeats India in gold reserves
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China last week announced that the country has 1,054 tons of gold in its state reserves. China’s gold reserves has risen 454 tons since 2003 and now the country is the fifth biggest gold holder in the world.
India is in the fourteenth position with 357.7 tons of Gold reserves
The economic meltdown that the world is reeling under has hit global powers and poor nations alike. Even as the super power United States struggles hard with its plunging economy and unemployment, analysts have been saying that this century belongs to the Asian giants—China and India.
China and India are neighbours, and have been developing their economies aggressively through a series of economic liberalization programs all these years. In many areas and industries, both countries compete globally. While in industrial production China beats India, in information technology India has been a big success story.
But not many analysts have compared where India and China stand when it comes to the hottest commodity in the world—gold.
In fact, there are several sharp differences between India and China in gold mining, gold reserves and gold consumption.
** A few years ago China overtook South Africa in gold production. And, now China may soon overtake India in gold consumption also. That is the new trend in China, which has seen a surge in gold buying in 2008. According to World Gold Council data, China’s demand for gold for investment has tripled in 2008 and could rise further this year.
**China has been the world’s second-largest gold consumer after India till now. But if the present trend in China continues, it may leave India far behind soon. China consumed 395.6 tonnes of bullion in 2008 for jewellery and investment, or around 14 per cent of global demand, up from 327.8 tonnes in 2007.
**Gold investment demand in China jumped to 68.9 tonnes last year from 25.6 tonnes in 2007. India’s total bullion consumption dropped 14 per cent to 660.2 tonnes in 2008, of which net retail investment slipped to 190.5 tonnes from 217.5 tonnes in 2007.
**Gold investment demand will remain robust in China because people are looking for an investment tool that they easily understand. In terms of jewellery demand, the 24-carat jewellery demand is going very strong in China.
Now let us come to some crucial questions? Who is the bigger guy in gold? China or India?
In gold mining and reserves, China beats India. In gold consumption, India beats China. First, let us tackle the gold mining figures between the two countries.
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Last year, India announced a big plan to mine the untapped bullion reserves across the country. The target was to mine some 20,000 tons of gold and diamond reserves. Mind-boggling figures. But sadly, all these years, India’s plan to mine gold from its vast plateau of rich mineral reserves has been really pathetic.
India currently produces hardly 0.4% of its gold consumption despite having 9% of global gold reserves under the country’s land mass. Though private entrepreneurs have come forward for reconnaissance, hardly less than 1% of them have come up to mining stage. This is mainly for want of latest technology, high risk capital etc.
China is already the world’s biggest gold producer. Last week, the Chinese government announced that it will increase its underground gold reserves by 800 metric tons and raise production to 290 tons this year. The Chinese government has chalked out plans to encourage the mining industry mergers.
Shandong Gold Mining Co., Zhaojin Mining Industry Co., Zijin Mining Group Co. and Lingbao Gold Co. are among China’s biggest producers. China has the world’s biggest foreign-exchange reserves at $1.95 trillion, with about 600 tons of gold.
From 2003 to 2008, China's average annual gold output grew 7.6 percent and profits increased by an average of 41 percent each year. Output in 2008 amounted to 282 tons with profits reaching 12.4 billion yuan, both setting new historic records.
Geological exploration in gold mines in China has made considerable achievements with reserves of gold resources increasing by an average of around 700 tons each year. In addition, the initial structure of the large gold enterprises leading China's gold industry development has already been formulated.
Now let us come to gold consumption in China and India.
India’s total gold holding is between 10,000 tonnes and 15,000 tonnes of which the Reserve Bank of India has only around 400 tonnes. Internationally, the total gold reserves (amount of gold ever mined) is between 125,000 tonnes and 130,000 tonnes, of which roughly 25,000 tonnes is held by various central banks. Most of that is held by the central banks of the United States, Germany, Switzerland, France and Italy.
India is the world’s largest consumer of gold. Indians buy approximately around 800 tonnes of gold every year. India is also the largest importer of the yellow metal; last year India imported around 400 tonnes of gold.
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