The liberalization on the gold jewellery prices will help heat up the gold consumption market and signify the market's further deregulation.
According to the State Development Planning Commission, gold jewellery, among another 106 commodities, are allowed to be priced freely by today's business people.
Before the price deregulation, the People's Bank of China commanded the standard price and the gold stores could decide their prices within a limit.
Ronald Wang, manager of the World Gold Council (North China), said the government's relaxed attitude of its control on the price of gold jewellery will activate the consumption and encourage more beautiful designs and better quality rather than lower prices.'' "Before the gold stores had no interest in jewellery designs prices were always the same and dictated by the authorities, so it made no difference whether the designs were beautiful or not," he said.
Now business people have got the momentum to sell more pretty jewellery and create name brands to entice consumers, Wang said.
Wang did not expect the price liberalization to ignite price cutting of the entire industry.
"The jewellery with common designs will see prices lowered but the prices of sophisticatedly designed jewellery will increase with rising costs and demand,'' he said.
As for the price cutting by some gold stores before the price liberalization was carried out, Wang said these stores just wanted to expand sales at the cost of meager profits.
Beijing Guiyou Department Store, one of the stores that cut the price and once promoted gold jewellery at 78 yuan (US$9.4) per gram, said to date it has not decided whether to cut prices again because of the price liberalization and will watch closely how the market moves.
Manager of the store's business department, Mr Luo said their gold prices had returned to 85 yuan (US$10.3) per gram.
He said the price cutting from July 6-15 has seen an increase in sales by 20 per cent.
After the price deregulation, the store will shift the focus on jewellery design, he said.
"In the long run, the price liberalization will help stop price cutting as more stores begin to attract consumers by products,'' Wang said.
Moreover, the price deregulation also showed the government's decision to further deregulate the gold market, he added.
"It will help the domestic gold jewellery price keep in line with that in the world market,'' he said.
The gold stores can freely decide their prices according to the cost, rather than have it set by the government, which drags behind the market, he said.
Since June, the People's Bank of China has stated the price for gold material every week, which provides a guide for stores' pricing their gold.
The related departments are also mulling over whether to relax control on the right to run gold stores, which is made possible by the deregulation of prices, he said.
According to insiders, a national gold exchange would be an important step towards deregulating the market, and could be launched late this year in Shanghai, China's financial centre.
The expected move will allow individuals to buy, sell and hold gold bars as an investment or saving.
Experts said demand for gold is expected to significantly increase after the long-awaited gold market deregulation.
The demand would rise to 800 tons annually over the next 10 years from 200 tons in recent years.
(China Daily 08/01/2001)
