Gold prices did what they often do in times of economic turmoil in 2020, surging to a record high above $2,000 an ounce by August as investors sought out the traditional safe-haven commodity. Demand for the yellow metal was particularly high among exchange-traded funds, although interest faded as pandemic-related uncertainty receded later in the year. 

For Chinese gold producers, like their counterparts elsewhere, the initial surge in prices was a boon nevertheless. China leads the world in gold production, with the country’s reserves concentrated in the eastern Shandong province, where many top Chinese gold miners are based. Starting from 2015, Chinese companies have also made significant investments in gold mines overseas. 

This week, The Wire looks at China’s role in the global gold market, including its top producers and who backs them.

The World in Gold

China, Australia, and Russia have been consistent leaders in gold production for over a decade, together accounting for nearly a third of global output in 2020, according to estimates from the U.S. Geological Survey. The United States, Canada, Peru, and South Africa have historically fallen just behind. 

Even prior to last year’s price surge, the gold mining sector was attracting attention due to a spate of large-scale tie-ups among industry titans. The enterprise value of gold industry deals reached $19.2 billion in the year ending June 2019, according to PricewaterhouseCoopers (PwC). Canadian gold companies have been to the fore, following Newmont’s acquisition of Goldcorp for over $10 billion in early 2019. China’s state-owned Zijin Mining, meanwhile, purchased Canadian Continental Gold in March 2020 for $1 billion. 

China’s total gold production has dropped off since reaching a high of 453 metric tons in 2016. Last year, output was down to an estimated 380 tons. Declining ore grades in domestic mines and the pressure of tighter environmental standards have led some Chinese companies to reduce or stop production altogether, according to commodities experts at the U.S. Geological Survey. China has relatively limited underground gold reserves with just 2,000 tons, behind Russia’s 7,500 and Australia’s 10,000 tons, and below even those of Canada, Peru, South Africa, the United States, Brazil and Indonesia. 

China plays a huge role as a gold buyer too: together with India, it accounts for roughly two-fifths of global consumption each year. Much of that demand is related to jewelry: When the pandemic hit China last year, jewelry-buying slumped, leading the country’s overall gold consumption to drop by 38 percent in the first half of 2020. Imports have since risen closer to their 2019 levels. 

Chinese Leaders

The Chinese government has a heavy hand in the country’s gold industry. The top shareholder in each of the leading companies shown below is a government entity, whether provincial or central. Many of the top companies are controlled by China National Gold, an entity formed in 2003 that is run by SASAC — the government body which in turn manages China’s state-owned enterprises. 

Some of China’s top gold companies have sought expansion opportunities overseas. That trend, though, has sparked national security concerns in regions and countries from Latin America to Africa and Canada, with many worrying about Chinese state-backed mining companies taking stakes in sensitive geographic areas like the Arctic.

Learn more about some of China’s top gold producers below, including details of their total mined metric tons of gold from domestic and international production.

Overseas Pioneers: Shandong Gold

Much like 19th-century American pioneers, Chinese companies seeking more gold reserves have looked West. Shandong Gold and Zijin Mining in particular have led the push overseas. Shandong formed a joint venture with Canadian mining company Barrick Gold in 2017 for a 50-percent stake in an Argentinian mine for nearly $1 billion. More recently it took control of another Canadian company, Cardinal Resources, which has interests in Ghana. But its attempt to take over miner TMAC was rejected by Canadian authorities in December over national security concerns. 

Its successes are also significant at home. A 2018 estimate put Shandong Gold’s share of the Chinese gold market at 6.6 percent. Its subsidiary, Shandong Gold Mining, listed in Hong Kong in 2018, in addition to its 2003 listing in Shanghai. 

See more about the ultimate ownership of Shandong Gold and its listed entity below.

---