By Tom Miles, BBC News, BeijingA ban on imports of gold from China is the latest blow to China’s gold producers, who have struggled to keep up with a surge in demand from the world’s biggest buyer of the metal.
Gold miners and traders said the ban, which will be in place for a minimum of two years, was the latest sign of the pressure being put on China’s economy.
“The market is tightening as a result of the ban and there is a lot of uncertainty about what will happen in the future,” said one of the worlds largest gold miners, Li Guangliang.
“I think there will be a lot more gold out there that was sold a few months ago.””
The ban has prompted concerns over supply.”
I think there will be a lot more gold out there that was sold a few months ago.”
The ban has prompted concerns over supply.
China is expected to sell some 5.7 tonnes of gold this year, compared with an average of 2.5 tonnes per year for the past decade, according to a report by the International Monetary Fund.
China’s foreign exchange reserves have fallen to $1.1 trillion from $2.9 trillion in 2008, when the country was hit by a currency crisis.
The country’s central bank has said the gold ban will not affect the value of the yuan.
Chinese exports of gold to foreign markets fell by 15.7 per cent in June compared with the same month last year, according the Central Bank of China.
Chinese authorities have repeatedly warned the ban will cause a loss of domestic demand, leading to a fall in foreign investment, with investors withdrawing money from the country.
China has a tight grip on gold.
It restricts trade in gold and silver to a maximum of about $2,000 per tonne.
The ban will also hit Chinese manufacturers, who rely heavily on exports of metal.
China currently exports about 80 per cent of its gold and almost all of its silver, according a report published in the state-run China Daily newspaper.
But its exports of nickel and cobalt, which are the main components of the metals used in the electrical and medical industries, have been declining since 2011.
China also relies heavily on iron ore for power generation and industrial machinery.
Its domestic demand for metals is a major source of revenue for the state.
In addition, Beijing’s central government is in a constant battle to control inflation and avoid the sharp rise in interest rates it is facing.
China does not have an official inflation rate but analysts believe it is close to a 3.5 per cent target.
China said last month that its government would start the process of removing some $3.5 trillion of foreign exchange from the economy.
China banned imports of silver and gold in June as part of a campaign against the use of the precious metal as a cover for gold smuggling.
A senior official from the State Administration of Foreign Exchange (SAFE) said the government would “implement the new policy on gold” as soon as possible, the official Xinhua news agency reported.
In June, the Central Gold Commission said that China’s domestic demand of gold and copper had been “severely hit” and it would need to boost domestic demand.
China, which has the world`s second-largest gold reserves after the United States, said it was working on the measures.
China will also start “reducing the level of gold in the foreign currency market and its financial market”, the SAFE said.
The announcement came after China`s government in June banned gold imports from North Korea, where it has banned imports for nearly a year.
North Korea is accused of stealing a total of 2,100 tonnes of Chinese gold last year.
Chinese Premier Li Keqiang, in Beijing, said he hoped to reduce the value and availability of foreign currencies in the country, Xinhua reported.
Mr Li said that the foreign exchange controls would be in effect for two years and the decision would be based on the results of the central bank`s gold review.
China had previously used the so-called “gold wall” to restrict foreign exchange purchases by the central banks of its key trading partners, Japan and the US.
China still controls a substantial amount of the gold market in the world, but it is increasingly moving away from the precious metals, with a number of Asian nations banning their imports.
China imports about 70 per cent for its exports and exports about 30 per cent.