China Never Stopped Buying Gold. Now It’s Building the Machine to Price It

Gold prices have recovered to $5,161 per ounce after January’s dramatic crash — and the epicenter of the rebound points squarely at China.

But this time, the story is bigger than speculation. Beijing is making a coordinated push to reshape the global gold market from the ground up.

The Hainan Arbitrage

Hainan’s new zero-tariff regime was designed to showcase China’s openness to foreign imports. The early numbers suggest it’s working — at least on the surface.

Hainan launched island-wide customs-free operations on Dec. 18. The nine-day Spring Festival holiday was the first major test. Offshore duty-free sales hit 2.72 billion yuan ($390.8 million), up 30.8% year-on-year, with 325,000 shoppers, according to Haikou Customs data reported by the Moodie Davitt Report on Feb. 24. The momentum had been building since December. January sales reached 4.86 billion yuan ($693.5 million), up 46.8% year-on-year, per Xinhua.

Gold jewelry remained a top draw during the holiday. China Daily reported on Feb. 23 that zodiac-inspired pieces and investment-grade bullion flew off shelves even as prices vaulted back above 1,500 yuan per gram. The Moodie Davitt Report confirmed jewellery and watches ranked among the top-selling categories at CDF Sanya, the island’s flagship duty-free complex.

The Global Times reported on Feb. 25 that leading brands Laopu Gold and Chow Tai Fook launched aggressive promotional campaigns during the holiday, including gram-based discounts and fee waivers for craftsmanship. A Chow Tai Fook salesperson in Beijing confirmed the increased foot traffic and purchases.

The price advantage in Hainan remains significant. Yicai Global reported in January that Chow Tai Fook gold costs roughly 1,250 yuan per gram in Hainan versus 1,430 yuan on the mainland. A 40-gram bracelet can save buyers 13,000 to 14,000 yuan with government subsidies factored in.

The pattern suggests something deeper about China’s consumer economy. Given a tax break, the middle class isn’t spending on luxury — it’s hedging with gold.

Hong Kong’s Bid for Global Bullion Dominance

While retail buyers flock to Hainan, Beijing is playing a far larger game. Hong Kong’s Undersecretary for Financial Services Joseph Chan announced at the Year of the Horse’s first gold trading session that the government will make a “full push” to transform the city into a regional gold storage and trading hub.

The plan is ambitious: expand Hong Kong’s gold storage capacity to over 2,000 metric tonnes within three years, launch a fully state-owned gold clearing system with trial operations later this year, and deepen alignment between the Shanghai Gold Exchange and Hong Kong’s market.

The objective is explicit — expanding China’s market share and influence over international gold pricing. Western financial centers have historically controlled that domain.

The initiative goes beyond domestic ambitions. Several Asian nations have expressed interest in storing sovereign gold with the SGE as it expands offshore vaults. Cambodia’s central bank is expected to be among the first to use SGE offshore vaults. It may store part of its 54 tonnes of gold reserves in Shenzhen’s bonded zone.

The Structural Bid Beneath the Speculation

January’s blowout — gold down 9%, silver crashing 26% in a single day — exposed the speculative froth. Leveraged retail traders were wiped out, gold ETFs saw nearly $1 billion in single-day outflows, and exchanges hiked margin requirements.

Yet physical gold demand in China barely flinched. Shanghai Gold Exchange premiums widened to $30-32 per ounce above London spot even as global prices cratered. Bank deposit rates have been crushed by monetary easing, the property market offers no refuge, and gold remains the most compelling store of value for households with few other options.

With gold currently accounting for just 1% of Chinese household assets — compared to a projected 5% in the near term — the structural bid from the world’s largest gold consumer is far from over. And now, Beijing isn’t just buying gold. It’s building the infrastructure to price it.