Vancouver (Kitco News) -Surging Chinese gold imports reflect increased wealth but it also may be the result of consumer fears that inflation is higher than the government admits, according to an author who contends there are dark days ahead for the country.

In an interview on the sidelines of the Vancouver Resource Investment Conference here, Gordon Chang said China may be on the edge of serious economic slowdowns and said gold purchases may mirror some of the fears of the populace. Chang was also a speaker at the conference, which is sponsored by Cambridge House International.

Chang, the author of “The Coming Collapse of China” and a columnist for Forbes.com, said during the last couple of months there has been a surge of importation of gold into China. He said a lot of it is consumer driven and could be because there is an increase in wealth and people want to buy gold with their money.

But he said that wealth has been available for awhile. “The question is why are they buying gold in these quantities right now?” he asked. “I think largely there is a concern of inflation which is much worse than Beijing is willing to admit. For in December they said the inflation rate was 4.1% for consumer goods. It’s probably double that, and the food inflation is much higher.

“And I think people are really worried about that and now that they’ve got the ability to buy gold, they are buying gold in big quantities and I think that’s a sign of concern on the part of local Chinese as to what’s going on in China.”

Chang said he has a different view on China than many economists and analysts. He said during the past 35 years China has experienced tremendous growth, but that growth was caused by certain conditions which either no longer exist, or are fast-disappearing.

“I think the Chinese economy hit an inflection point probably in September and what we’re seeing now is slowing growth. But we’re also seeing plunging property prices, declining industrial production, and troubles throughout China’s export belt. I think it’s indicative of a new super cycle (but) this time the super cycle is not up, but it’s down,” he said.

Chang said there are interesting developments in China related to industrial metals, which should be pressured by a slowing economy. But he said with an economy becoming stagnant, China may be importing resource commodities at a higher level and stockpiling them to disguise a slowdown in consumer product imports.

“What’s happening is that Beijing is now stockpiling commodities like crude oil, copper, iron ore, in order to boost its import numbers,” he said.  “So therefore you see this surge of commodities going into China which I think is stockpiling by the part of the central government in order to massage its trade numbers.”

Chang said this action will be good for resource commodities in the short term but “eventually, of course, that’s going to catch up with Beijing and you’re going to start to see declines in importation of materials, but for the moment now it looks really good.”

Chang said besides China’s domestic worries, there are concerns, too, that Asia may be affected by the lingering European financial crisis. These problems may be good for gold prices, he said.

“For China I think there is also a concern about the general direction in the economy, but if you step back and look at the world, I believe Europe is going to trigger a crisis probably this year,” he said. “We’re going to see problems that are going to ripple throughout North America and Asia, and so in times of crisis you’re going see people go into precious metals, and so gold is certainly going to benefit from that. I think gold is probably going to move upward.”

By Daniela Cambone of Kitco News dcambone@kitco.com

Terry Wooten and Cecilia Tulikowski-Denison contributed to this article.

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