Analysis: China's banks lure man on the street to gold

Thu Jan 19, 2012 10:56am EST
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By Rujun Shen

SINGAPORE (Reuters) - For Chinese shipping executive Ping Bo buying gold is the best way to protect his family's wealth and give his 10-year-old son a headstart into adulthood.

"For my son, the idea is that he will get a nice stash of gold that he can cash out when he turns 21 or when he gets married," said Ping, one of over 2 million people that have opened accounts in the past two years to accumulate gold at the Industrial and Commercial Bank of China (ICBC).

The ICBC launched the accounts in April 2010. The gold that it has bought to back them is only a fraction of total Chinese demand, but the explosive growth in the number of investors that have signed up is a symptom of the wider demand for the precious metal in the world's most populous country.

China, expected to overtake India as the world's top gold consumer in the next few years, accounted for 23 percent of the world's total consumer physical gold demand in the first three quarters of 2011, up from 19 percent in 2010, according to the World Gold Council (WGC).

Growing wealth in a traditional culture that favors gold, economic uncertainty and looser regulations on the domestic gold market together have combined to create rapid growth in China's gold demand.

The accounts are one of a range of methods that China's banks have come up with that allow small investors like Ping access to the gold market.

Investors buy as little as a gram a month through the accounts, a tiny quantity but one that adds up when the middle class of the world's most populous country is involved.

"It's a fantastic way for me to accumulate gold," said Shanghai-based Ping.   Continued...