China

China’s gold production in 2001 was 182 tonnes (5.8 million oz) according to official figures released by the Xinhua News Agency. This places China fifth in the world league after South Africa, the United States, Australia and Indonesia. Some observers believe that this figure includes production brought into the country from abroad and presented as Chinese mine production – for example, GFMS suggests that actual Chinese mine output in 2001 was closer to 173 tonnes (5.6 million oz). On the other hand, it is fairly safe to assume that some output would not be included in the official numbers but would remain unreported, as the industry is still relatively unsophisticated with limited new technology and therefore high levels of informal mining.

China has over a thousand mining operations, many of them village co-operatives and only a few mines with output over 1-2 tonnes (32,000-64,000 oz). The largest mine is reported to yield under 5 tonnes (0.16 million oz).

China has a long history of gold production. As early as 1091 BC gold was legalized as money (as an alternative to silk), circulating in little squares. Hebei province, one of the main mining areas, claims production for over three thousand years. The Zhao Yuan mine in Shandong province has been worked for over a thousand years; other Shandong mines date from the 17th century.

In the 1990s the Chinese government, faced with rapidly growing domestic demand for gold, gave priority to mine expansion, seeking to double output in the five-year plan from 1991-6. Growth certainly took place. The State Gold Bureau and the China National Gold Corporation, which implements its policies, sought advice from South African, Australian and North American miners, and sent delegations to see mines. Joint ventures were proposed, some companies even opened exploration offices in Beijing. No joint projects really matured, although some Chinese mines adopted carbon-in-pulp and heap leach technology.

The Mineral Resources Law in 1997 did not clarify the status or right of foreign companies to explore freely, but China’s reluctance to allow them to acquire majority or full ownership of state enterprises not regarded as ‘strategic’ may be declining. . The new Ministry of Land and Resources (MOLAR) is reported to have addressed many of the mining companies’ suggestions as to how the industry might best be structured.

Meanwhile, the assortment of local mines continues. The Chinese National Gold Corporation presides over more than 400 operations, employing 300,000 people, but many more are run by provincial governments, including Shandong, which with Hebei provinces remain the chief gold producing areas, but Sichuan, Shaanxi and Gansu provinces of central China and Guizhou in the south all have provincial mines.

Officially all gold should be sold to the People’s Bank of China, the central bank, but its buying price is not always competitive, and gold is sold into the local market or is smuggled out to Hong Kong. At other times, if the People’s Bank price is right, gold is smuggled into China and passed off as new production – making it harder to determine the true domestic output. Possibly mines also hoard or disgorge to smooth their earnings.

It is probable that the People’s Bank of China’s controls on the gold market will be relaxed in the coming years, although the time frame is still uncertain. For example, a new Gold Exchange in Shanghai is due to be set up, but has not yet been finally confirmed. Notwithstanding the uncertainty regarding the timing of liberalization, it seems likely that the real test of China’s potential as a gold producer will come once the market is freed up to allow foreign investment.