TIANJIN, China (Reuters) - China’s gold consumption will be about 430 tonnes this year, but accelerating domestic output will reduce its need to import, Sun Zhaoxue, general manager of China National Gold Corp, said on Wednesday.
“China’s gold production has been gradually increasing and will continue to do so in the coming years, so imports could start to gradually fall,” Sun told a conference in the port city of Tianjin.
China imports about 100 tonnes of gold each year, Sun said.
He did not say if this year’s gold consumption would be greater than in 2009. But adding 100 tonnes of imports to China’s output of 313.98 tonnes last year would mean total supply of about 414 tonnes.
This year gold output had run consistently ahead of 2009, at least until August, the latest month for which figures are available.
In the first eight months of 2010, gold production was up 8.85 percent from the same period of 2009, at 217.953 tonnes.
China is finding new gold reserves faster than it is producing the precious metal, so there is no danger of the country exhausting supplies, Sun said.
“Gold reserves are outpacing production and there’s no way we’ll be running out of reserves in six years,” he said, referring to a recent forecast by the World Gold Council.
A WGC report in March said China’s existing gold mines could be exhausted within six years because of the rate of production.
China electrified the gold market last year when the State Administration of Foreign Exchange (SAFE), part of the People’s Bank of China (PBOC), revealed that state reserves had jumped to 1,054 tonnes since the last such announcement in 2003, when it had 600 tonnes.
Sun said China should boost its state gold reserves further, echoing the view of many officials who have said China should buy more gold with its foreign exchange reserves, which stood at $2.648 trillion at the end of September.
“China’s total holding of gold reserves is still far lower than the United States’,” Sun said, adding that he expected gold prices to continue on an uptrend in the longer term.
“We have been urging the PBOC and SAFE to boost China’s gold reserves because it will enhance our (China’s) financial stability,” he told reporters.
But many officials and analysts have pointed out that buying gold would do little to diversify China’s forex holdings, since even buying a large amount would only account for a fraction of its reserves.
Editing by Ken Wills