China vows to smash smuggling in gold by July
CHINA, the world's largest purchaser of gold, is cracking down on the largely covert trade in the precious metal.
Amid soaring inflation, fueled by rapid economic growth and a weak currency, many Chinese have turned to gold in recent years. But more than one-half of the gold sold in China - about 370 metric tons in 1993 - was illegal and smuggled into the country by overseas Chinese, according to Western and Hong Kong analysts.
Facing declining income from the gold trade, the government, which officially holds a monopoly on the metal through its central bank, says it plans to smash the black market in gold by July. Local officials overseeing gold dealings will be punished if black-market activity is discovered in their areas, the government says.
Because official prices didn't keep pace with international levels, gold purchases by the People's Bank of China fell 35 percent from 1993 levels in the first four months of 1994. Last year, sales to the state were 32 percent below 1992.
China is trying to lure foreign investment to increase mine output. All but 15 percent of production goes into state reserves. The remainder is sold to jewelry-makers, who use the black market to compensate for the inadequate state supply. They sell their gold products at up to 60 percent more than the world price.
Analysts predict demand will keep climbing, since the Chinese have few means to stay ahead of price hikes.
``If you already own a refrigerator or a color [TV], what else can we buy?,'' says one Beijing resident who asks Hong Kong visitors to buy her gold.