Why gold is losing its sheen among Chinese jewellery buyers
As Chinese consumers cut back on gold purchases for a second year in a row, nowhere is the slowdown being felt more than in the country’s once-bustling jewellery manufacturing and retail hub of Shuibei.
Gold demand has taken a hit from a slowing economy and Beijing’s anti-corruption drive, which has cut demand for luxury products, but there are fears of a more protracted loss of confidence among buyers in the world’s top consumer of the precious metal.
With buying in No.2 consumer India also soft, another year of weak Chinese demand would help pile more pressure on global gold prices languishing near six-year lows.
The hundreds of jewellery stores in Shuibei, a district of Shenzhen only a short hop over the border from Hong Kong, have seen business take a downturn since a buying boom peaked in 2013 as once-voracious Chinese consumers turn cautious.
“They don’t have confidence in gold now given the weak prices, so demand won’t pick up anytime soon,” said Wang Zhichang, regional manager of the Glory Gold store, adding revenue was likely to fall a further 10 percent next year on top of a drop of 10-20 per cent this year.
Wang, who was among 30 staff in the store at a time when there were no customers, said that a number of jewellery factories had closed in the past year in the area.
Big retail chains, including Chow Tai Fook, the top jeweller by market value, are also closing branches and cutting back store openings in the mainland and Hong Kong.
Chow Tai Fook last month reported a 42 per cent drop in net profit in the April-September period and said it would open only a net of 60 stores in China in its current financial year ending March, from a previous target of 150.
“Customers have become more rational with their purchases,” a company spokesperson said by email.
Illustrating the strains in the industry, Chinese banks have begun to see loan defaults by jewellery manufacturers, hurt by weak sales, Reuters reported last month.
Read full article: Financial Express
