No more precious metal
(XU XIAOMIN)
08/10/2001
After years of relative stagnation, the market in gold jewellery has experienced ripples of activity following the liberalization of gold jewellery prices. Last Thursday, a day after the State Development Planning Commission liberalized prices, one diamond store on Nanjing Donglu lowered its retail price to 86 yuan (US$10.4) per gram, 17 yuan (US$2.1) lower than the average price of 103 yuan (US$12.5) per gram. Another store selling Ming brand jewellery said it would scrap the processing fee, according to officials from the Shanghai Gold Jewellery Association. Before the deregulation, the People's Bank of China, the central bank, commanded a standard price of raw materials, and the central government gave the retailing price of gold jewellery. Stores could only decide their prices within a limit. Price war ahead Gu Guochun, director of the association, said he was worried. In recent years, some cities where the rules are not strict have seen price wars. The price of gold jewellery per gram was as low as 78 yuan (US$9.40) in mid-July in Guiyou Department Store, Beijing. The price war in Hangzhou led to some jewellery stores closing. "The market in Shanghai is always steady and healthy compared with other cities," Gu said. "Most name-brand retailers in Shanghai are mature and keep a cool head, like Lao Feng Xiang and Lao Miao." Since liberalization, the price of gold jewellery in these dragon heads has remained stable. The price in Lao Miao and Lao Feng Xiang has been lowered a little from 103 yuan (US$12.45) per gram to 98 yuan (US$11.85). "But to prevent chaos in the local market, the association will bring some discipline to the field," Gu said. Over 10 gold ornament retailers including those dragon heads mentioned above together released a bottom price of gold ornament in Shanghai of 96 yuan (US$11.60) per gram. Since the bottom line released this Monday, those extremely low prices such as 86 yuan (US$10.4) per gram disappeared from the counter. The Price Bureau and the association will set seven observation spots in stores in the downtown area and five in the suburbs, aiming to supervise the price changes, and will release price reports every week. Bottom line The liberalization is aimed at gearing up for the international pricing system, Gu said, adding that it was a key step towards the opening of the gold market. For a long time, the gold jewellery price in China has been separated from the market and has been adjusted by the government. "Sometimes when the gold price decreases in the international market, the price in the domestic market rises," Gu said. "But the bottom line of about 98 yuan (US$11.85) per gram won't be broken after the liberalization," said an official surnamed Ji from a local jewellery store. According to Ji, the wholesale price of gold jewellery from the factory is about 84 yuan (US$10.2) per gram. The retail price is about 20 per cent higher than the wholesale price, which can equal the daily cost of the store. "So the extremely low price won't possibly appear in Shanghai," Ji said. "The liberalization of the gold jewellery price does not mean the retailer can decide the price according to their own wish," said Mao Wen, manager of the World Gold Council (East China). Obsolete designs According to statistics of gold jewellery consumption in the city in recent years, the volume remains at 10 tons per year. Previously, the consuming proportion of gold jewellery accounted for 70 per cent of the total consumption of jewellery in Shanghai. Now it accounts for about 40 per cent. Diamond and platinum jewellery leads, according to sources from Shanghai Gold Jewellery Association. The out-of-date designs of gold jewellery create little interest from consumers. "As the ability of gold jewellery to keep its value gradually fades for local consumers, price is not a key element in stimulating consumption," Gu said. One consumer said she would still buy gold products in Lao Miao's outlets rather than choose cheap ones in other stores that did not have such a high reputation. "In future, brand and design will be the focus affecting consumption as gold products become ornaments rather than stores of value," Mao said. "Only the product itself and not the low price will improve consumption of gold jewellery." Nowadays, gold jewellery is still priced mainly according to weight, but the international practice is mainly to price jewellery by piece. In future, the price in the local market will be closer to international practice, experts said. The price of a piece of gold jewellery is composed of the cost of raw materials, the processing fee, tax and profit. With a greater emphasis being placed on branding and design, the processing fee is set to rise.
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