LAWRIE WILLIAMS:China taking in more Swiss gold than Hong Kong for second successive month
Time was when Hong Kong gold exports to the mainland were an excellent proxy for total Chinese gold imports. The semi-autonomous Chinese region, whose statistics are treated differently than those for the rest of China – in other words effectively as those of a separate country – was the conduit for the great majority of mainland China gold imports, so fluctuations up and down in the Hong Kong figures used to be an excellent guide to total Chinese gold non-domestic uptake. While the Chinese mainland does not issue gold import data, Hong Kong, in a throwback to its old British colonial days, continues to issue monthly reports on its imports and exports, and thus was treated by the media and most gold analysts as the principal guide to the Middle Kingdom’s gold imports.
But this is no longer the case. Two years ago, China eased restrictions on direct imports of gold from other nations than Hong Kong, and since then the proportions of gold imported directly, rather than via Hong Kong, appears to have risen dramatically. Hong Kong gold exports to the mainland are thus no longer even a sensible guide to the total Chinese figure.
This is borne out dramatically by this year’s gold export statistics to China and Hong Kong from Switzerland. The Swiss figures are particularly important as the Swiss gold refineries have been dominant in the global gold trade in re-refining gold delivered there from around the world into the small bar and wafer sizes mostly in demand from the key gold buying nations, China and India. This represents a very significant part of the global gold flow mostly from West to East, although in February very significant amounts of Swiss gold imports came from the United Arab Emirates, Turkey, Thailand and Venezuela as well as from the usual principal sources – the U.K. and the U.S.A. and France. Make of this what you will, but bear in mind that Switzerland is the home of the Bank for International Settlements (BIS) – the central bankers’ bank – and a proportion of these imports could relate to gold swap activity. Indeed for February Swiss gold imports exceeded exports by over 90 tonnes, suggesting that around half of this was being vaulted in Switzerland, or moving into the BIS.
In terms of exports to greater China though, the statistics are particularly illuminating. February was the second month in a row where gold exports to China exceeded those to Hong Kong – for the January figures click on Switzerland January gold exports: Mainland China much higher than Hong Kong. Thus over the first two months of the year Switzerland exported 67.1 tonnes of gold direct to mainland China and only 43.9 tonnes to Hong Kong (figures from Nick Laird’s www.sharelynx.com website.) If this pattern is repeated across other nations shipping gold to China and Hong Kong it suggests that nowadays around 60% of China’s gold imports may be going to the mainland directly, completely bypassing Hong Kong, thus making Hong Kong’s gold exports to the mainland of hugely less relevance in trying to work out China’s gold import figures. This is something of a shame given mainland China’s non-reporting of overall gold imports, but then the country does seem to try and make life difficult for analysts trying to make head or tail of total incoming gold flows.
However, no doubt some media will still seize on the rise and fall in the Hong Kong gold exports statistics, when they are published, Take this Bloomberg headline from the 25th February for example in reporting Hong Kong’s January gold imports to China - China’s gold imports from Hong Kong slump to lowest since 2011. Technically accurate but could also be taken as misleading at the same time given a possible interpretation that Chinese total gold imports had fallen back to the same extent, where the Swiss export statistics suggest that this is not the case at all. Careful selection of statistics, without adequate explanation, can be somewhat misleading. To be fair to Bloomberg, though, the body of the article did also note the Swiss January gold export figures referred to above, but without any explanation of the significance of this in the context of proportional overall gold flows into the mainland.