Council Hoping Government Stimulus Measures Will Spur Consumption In Notoriously Frugal Rural Areas
Shanghai Daily reports today that the World Gold Council has started a major sales drive in rural China, banking on indications that the country’s second- and third-tier cities have more sales potential than their first-tier counterparts in terms of gold consumption. This sales push follows similar drives by antiques, visual arts, shopping center and luxury car companies to attract customers in China’s interior — where any semblance of “luxury fatigue” has yet to sink in and the middle class is seeing gradual growth.
As one of China’s traditional hedges, the World Gold Council is banking on gold’s allure to buyers in remote areas both for its value as well as its cultural resonance.
“Rural areas showed better-than-expected demand for gold in the first half in China,” said Gerry Chen, business development manager China of World Gold Council.
China is the only country in the world where gold jewelry demand has risen in the aftermath of the world financial crisis, the council said. Sales in China’s mainland rose 9 percent in the first half, while global demand contracted 8 percent.
But demand in China was unevenly spread.
“Gold demand was flat in Beijing, Shanghai and other first-tier cities, while consumption in rural areas showed surprisingly strong growth,” Chen said.
Chen declined to break down figures and said details of the rural marketing campaign have yet to be finalized.
Indeed, prosperity is returning to the hinterlands, where household spending and consumer sentiment is rising faster than big cities.
About 59 percent of rural households in a MasterCard survey said they plan to increase spending in the next 12 months, compared with 41 percent in big cities.
China has increased spending in rural areas as part of a comprehensive stimulus program to boost domestic consumption to counter a slump in exports, the traditional growth engine.
“The second half will maintain momentum,” said Chen. “It was hustle-bustle at the Shenzhen International Jewelry Fair last week. Retailers stood in long lines to do business.”