China To Create $16 Billion Gold FundBy Neils Christensen
Wednesday May 27, 2015 12:55
(Kitco News) - In its continuing efforts to develop its gold market and global influence, China is launching a new fund, which is expected to raise 100 billion yuan ($16 billion).
Monday, state-run newspaper Shanghai Securities Journal quoted unnamed sources saying that the fund will be used to invest in mining projects, and in the creation of gold-backed exchange-traded funds.
According to an article in Marketwatch, the “Silk Road Gold Fund,” will be led in part by the Shanghai Gold Exchange (SGE).
Along with the SGE, two of the country’s leading gold producers, Shandong Gold Group and Shaanxi Gold Group, have also bought a stake in the new fund of 35% and 25% respectively.
This new investment fund is part of the “Silk Road” initiative, to develop infrastructure across Asian and increase ties with neighboring countries. The plan includes building a network of railways, highways, oil pipelines and telecommunication lines.
After officially unveiling the new “Silk Road” project in March, President Xi Jinping said he hoped annual trade with the countries involved in the plan would surpass $2.5 trillion within a decade.
The new gold initiative comes at a time when demand has dropped throughout the country. Analysts have noted that strong Chinese equity markets have reduced gold demand throughout the country.
However, despite weaker demand this year, Juan Carlos Artigas director of investment research at the World Gold Council (WGC) has said in recent interviews with Kitco News that it remains an important component of the global market.
According to the latest statistics from the WGC, China is now the world’s top gold consuming nation, surpassing India for the title. In its 2015 first quarter report, the WGC said total consumer demand in mainland China was 272.90 tonnes, down 7% from the first quarter of 2014. At the same time total consumer gold demand in 2014 was 973.6 tonnes.
However, in its 2014 year-end report, the WGC said that China’s growing middle class is expected to lead to strong long-term gold demand. According to the council’s research, China’s middle class is expected to growth to 500 million over the next five years.
“Which implies that the development of gold market infrastructure taking place in the east will be put to good use as China continues to urbanize and its middle class expands,” the WGC said in its 2014 year-end report.