In our coverage of Chinese gold imports in the past we have noted that all the figures quoted by the mainstream analysts like GFMS appear to tally closely to the only official import statistics available – those through the entry port of Hong Kong which are published monthly. However the central government in Beijing does not produce any figures on gold imports for mainland China itself (although the People’s Bank of China (PBOC) does produce annual figures on gold consumption) and here on Mineweb we have always suggested that imports through Hong Kong do not present the complete picture with gold imports to mainland China through other ports of entry as well. To us it would seem logical that there are other routes for gold to enter the country which means China’s gold imports could be greater, perhaps substantially so, than relying on the Hong Kong figures would suggest.
It is thus encouraging to note that there are other serious analysts of the Chinese gold import and consumption data who come to the same conclusions. One of these is Netherlands based Koos Jansen.
In his latest blog posting he suggests that Chinese gold consumption in the current year will more likely exceed 2,000 tonnes, perhaps as high as 2,200 tonnes which implies a much higher level of imports than the World Gold Council’s assumed 1,000 tonne estimate issued far earlier in the year before the continuing high monthly figures for imports through Hong Kong had become fully apparent.
Our assessment, taking the latest Hong Kong figures into account, has been that imports via this route alone will likely reach between 1100 and 1200 tonnes in the current year. In the first 9 months of the year 826 tonnes have been imported through this single port of entry according to the Hong Kong Special Administrative Region’s own official figures.
So, how does Jansen arrive at a much higher total estimate? He draws on published figures from the PBOC, the Shanghai Gold Exchange (SGE) and Swiss gold import and export data to reach his conclusions. His estimates are not new – he originally published much of this data back in September, but now has more up to date figures, supported by numerous graphics. Key to his assessment will be the deliveries of physical gold as reported by the SGE which tie in exactly with the PBOC’s own annual published data on Chinese gold consumption (not surprising in that the PBOC controls the SGE). This consumption data, reckons Jansen, is the base data on which China’s true imports should be assessed – not the Hong Kong import figures on their own.
Back in September this year, Jansen noted that deliveries of physical gold from the Shanghai Gold Exchange had already reached 1,546 tonnes and extrapolating this to the end of the year puts the annual total at over 2,000 tonnes. If one takes into account China’s own gold output, estimated at 420 to 430 tonnes for the current year, taking this off the total SGE physical gold delivery figures this makes for implied imports of around 1,600-1,800 tonnes – comfortably above the earlier WGC 1,000 tonne estimate.
But does this even indicate the true picture? Chinese gold production – the aforementioned 420-430 tonnes – goes directly to the PBOC, but whether it goes from there to the SGE for onward delivery or into what most observers now believe to be ever increasing, but unreported, additional Chinese gold reserves is uncertain.
And it is not known whether some of the SGE deliveries are also into the PBOC’s reserves. In China nothing is totally transparent.
Back to the Swiss data. Jansen uses this to demonstrate how the gold reaches China. He picks up on U.K. gold exports to Switzerland which have been running at a very high level indeed and reckons this is largely the gold that has been bleeding from the gold ETFs mostly stored in London. Evidence from the Swiss refiners is that the good delivery LBMA 400 ounce gold bars are being re-melted into smaller kilobars and most is being shipped to China, but also some to other Asian and eastern markets. To give an idea of the size of the trade through the Swiss refiners, Jansen notes that in the first three quarters of the current year, Switzerland has imported 2420 tonnes of gold and exported 2184 tonnes. Most of the gold ETF redemptions we have seen over the past year have been following the route from London to Switzerland for re-melting and on to China.
While Chinese gold consumption and gold imports are likely to differ, one can argue that, over time they will approximate to much the same amount and the PBOC and SGE figures quoted by Jansen suggest a far larger intake than most other western published data would suggest. The main question now is: how much of this is going into the jewellery, investment and industrial sectors and how much, if any, into growing Chinese gold reserves?
For those who are interested, do read Jansen’s latest postings on the web as noted in the link in the second paragraph above. He supports his findings with a number of illustrative charts on the various aspects of the gold trade through London, Switzerland and Hong Kong, along with redemptions from the GLD ETF and the statistical data gleaned from the PBOC and SGE.