Conference 2018: Interview: Li Fu

Deputy Division Chief, China Citic Bank

Transcript

China is the biggest consumer and producer in the gold market. It has been the biggest for the past four years. Quite a few things have been changing in China. For one is, they are a new generation that has grown up with electronic products instead of jewellery and more fancy stuff. I would say that the new generation are a lot different from the older generation. In a way, they are a bit antisocial because they get too much into computers or smartphones. So they would rather stay home and play computer games. Like jewellery industry it is sort of like a set up for the social activities, like when you wear your fancy dress and your favourite jewellery when you go out to parties. Nowadays, however, it has changed. So I will say in this way, it has changed the demand for jewellery a little, because as you know, jewellery makes up the majority of the consumer part in gold. That probably will change a little in terms of demand for gold.

However, something else has also happened in China. Online shopping has become more popular in China. And also the shipping industry seems to be spread out nationwide, so it is more convenient for like the fourth- or fifth-tier cities or even the rural countryside people can buy their favourite brand of jewellery online and have it shipped right to their door. It has become more convenient for them in terms of purchasing. This trend changes the jewellery industry a little. Seems like more consumer power coming from the countryside or from fourth- and fifth-tier cities instead of the traditional big players such as the big cities, the dominant cities. This is probably what has changed in terms of consumers in China.

Back in 2011 or 2012, people were crazy about gold. They go out and bought gold bars and gold jewellery. They buy ETFs, gold-linked products and wealth-management products. But as you know, however, after that time the price of gold came down and sort of like lost its shine, in a way in terms of investment perspective. It might not get high returns as some alternatives in China. So as of right now, it is stable. In terms of the local currency, the gold price is very stable. So people tend to trade gold within the range. When the price comes down a little, they will buy; when it goes up a little, they will sell right away. It is not a long-term play but more of a short-term play. This is more from the investment perspective.

We do not really see a significant growth in demand in gold. It will probably be stable, with perhaps a little growth in 2018 but not much. Of course, it really depends on a lot of other stuff, like how the currency performs and what the price of gold is going to be in terms of local currency. That really depends on some uncertainties but, from what we can see from those factors right now, it looks like the currency will be fairly stable. With a strong dollar for the whole year, which was the theme for 2018, we believe next year, the dollar might get a little softer and it might not put too much pressure on gold. So it may give some support to gold too. We think it is a fairly good year for gold. Although it is not like a crazy jump in demand, but it is fairly good.