[Correspondent Diary] 2022 China Economy Seen Through Geum

The Return of Chinese Ajumma... Purchased 1000t of Gold as a Safe Asset Last Year
Gold Consumption Reflects the Intricate Aspects of the Chinese Economy... Also Mirrors US-China-Russia Geopolitical Dynamics

[Asia Economy Beijing=Special Correspondent Jo Young-shin] 'Junggwo Dama (Chinese Ajumma)'. It has the same meaning as Japan's 'Watanabe-san'. It refers to major players in investment product markets such as real estate and stocks. In Korea, it is similar to the term Bokbuin.

The term Chinese Ajumma began to be known about 9 years ago, in 2013. At that time, when international gold prices fell by nearly 20%, the amount of gold purchased by Chinese Ajumma reached a staggering 300 tons. Even calculating at about $1,200 per ounce, it amounts to an enormous $12.7 billion. The People's Daily reported that the term Chinese Dama attracted public attention to the extent that it became a hot search term overseas, and that Chinese individual investors and Chinese consumer behavior are examples demonstrating the development of national power.

Photo by Global Times capture

Those who had not shown significant movement in the gold market have started moving again.

According to the China Gold Association, last year China's gold consumption increased by 36.53% from the previous year to 1,120.90 tons. Compared to 2019, before the outbreak of COVID-19, it also increased by 11.78%. By sector, gold jewelry consumption rose 44.99% to 711.29 tons, and gold bars (including gold coins) increased by 26.87% to 312.86 tons. On the other hand, raw gold production decreased. Last year, domestic raw gold production in China was 328.98 tons, down 9.95% (a decrease of 36.36 tons) from the previous year. This means that most of the increased gold consumption last year was for investment purposes.

The gold investor demographic has also become younger. Last year, 75% of Chinese gold investors were aged 25 to 35. The age group of Chinese Ajumma, who were in their 40s to 50s, has lowered to their 20s to 30s. In other words, the Chinese Ajumma generation has changed. Real estate market regulations and blocked investment paths in virtual currencies like Bitcoin also seem to have increased the desire to invest in gold.

Investment in gold ETFs has also increased, not just physical gold. According to the World Gold Council, at the end of last year, China's total gold ETF holdings reached a record high of 75.3 tons. Net inflows last year alone amounted to 14.4 tons. Especially in the fourth quarter of last year, it increased by as much as 3.4 tons.

The revival of China's gold consumption, which had been quiet for a while, is related to the Chinese economy. At the Central Economic Work Conference held in early December last year, the Chinese leadership diagnosed that the Chinese economy faces three risks: demand contraction, supply shocks, and weakened expectations, and expressed a strong will to stimulate the economy by injecting money. In fact, the Chinese government cut the benchmark interest rate as soon as the new year began. It also hinted at additional cuts depending on the situation. Lowering the benchmark interest rate reduces bank deposit and savings interest rates. Interest income inevitably decreases.

When money is injected, inflation normally rises. Rising prices mean the value of money falls. It is a natural phenomenon for money with nowhere to go to move into safe assets (gold).

Chinese government-affiliated scholars are optimistic that the Chinese economy will grow about 6% this year, but Chinese Ajumma are preparing for shocks. The increase in Chinese gold demand reflects the intimate aspects of the Chinese economy. China's gold consumption also contains the unstable international situation, including US-China conflicts and US-Russia relations.

This content was produced with the assistance of AI translation services.