A Golden Route

During the 19th National Congress of the Communist Party of China， China made clear its determination to further reform its state-owned enterprises （SOEs） and foster a number of world-class， globally competitive national corporations.

As the only centrally administered SOE in the countrys gold industry， China National Gold Group Corp. （China Gold） has quickened its pace to seek new development opportunities along the Belt and Road routes. It has developed a “going global” roadmap covering Kyrgyzstan， Russia， Canada， Congo and elsewhere.

In a recent interview， China Gold Chairman Song Xin talked to Beijing Review reporter Deng Yaqing about the nations gold industry， overseas development opportunities and the groups experience of participating in the Belt and Road Initiative. Edited excerpts of the interview follow：

Beijing Review： What role does gold play in the national economy？

Song Xin： Throughout the ages， gold has been adored and favored. As a special commodity with monetary attributes， it is of strategic signifi cance to the national economy and fi nancial security.

If a country wants its currency to be used globally， besides trade volumes and an economic aggregate that are extraordinarily large， and strong national and military power， it has to stockpile a huge amount of gold as reserves because the precious metal plays a vital role in guaranteeing national economic and financial security， resisting fi nancial crisis and [mitigating the] risks of war and [natural] disasters.

As Chinas economy has entered the “new normal，” how is the nations gold industry faring？

Chinas gold industry is gaining momentum， with leap-and-bound progress being made in exploitation， smelting and processing， design， consumption and investment. China has become the largest gold producer， processor， importer and consumer in the world.

Confronting the prolonged stagnancy since global gold prices plunged in April 2013， China has been reinforcing its endeavors in reforming， underpinning and stabilizing the development of the gold industry.

Following the discovery of two worldclass gold mines in Laizhou， Shandong Province， in 2015， another large gold mine with proven reserves of 382.58 tons was found in the region early this year； new technologies have been applied in exploitation and production； breakthroughs have been made in the treatment of low-grade gold ore； and investment in environmental protection has been signifi cantly increased to cut waste gas emissions and discharges of waste water and residues.endprint

From another angle， the domestic gold industry is constrained by a few problems. In mining， low industrial concentration， exhaustion of old gold mines， technological challenges in deep mining and some enterprises low effi ciency still hinder the development of the sector. In consumption， due to a lack of guidance and the overwhelming ubiquity of low value-added products， domestic gold retailers mostly still rely on selling the raw material； traditional processing crafts have not yet fully integrated with new information technology， and as a result， individualized needs are not satisfied； and a lack of creativity in design and sluggish brand building add to the wide gap with foreign rivals. In addition， there are still some deficiencies and loopholes in market supervision， rules and regulations， and improvement is needed in the policy support system.

How is the gold industry performing in countries along the Belt and Road routes？ How has China Gold adjusted its international business strategy since the Belt and Road Initiative was proposed？

Countries along the Belt and Road routes abound in gold resources and see high demand. For one thing， the routes are dotted with a total of 26 gold producing countries such as Russia， Mongolia， Tajikistan， Myanmar， Viet Nam and Philippines； for another， besides China and India—traditionally major consumers of gold—countries like Turkey， Saudi Arabia and Iran make up a large part of the demand side.

Since the Belt and Road Initiative was unveiled， China Gold has been trying to embrace strategic thinking for globalization and has embarked on a journey to seek new business breakthroughs in overseas markets. At the same time， the company has accelerated its action to jointly explore gold resources and markets along the routes and has gone all out to push forward global cooperation in production capacity. New ground has been broken in global cooperative exploitation.

What opportunities and challenges does the Belt and Road Initiative bring to Chinese gold enterprises？

There are abundant gold resources along the Belt and Road routes， but infrastructure in these regions is weak， and technology is backward. In contrast， Chinas gold sector is superior in terms of capital， technology and human resources. Aside from that， compared with other mining industries， gold exploitation features low investment， quick returns， low energy consumption per unit of output， and low infrastructure requirements in the initial construction stage. Given that， the gold industry is most likely to pioneer exploring the Belt and Road markets.endprint

Meanwhile， Chinese enterprises in the trade also have to embrace challenges in their overseas ventures. First， many domestic enterprises still lack knowledge of local social customs， markets and political situations. Second， upstream and downstream gold enterprises should give full play to their advantages， and seek coordination and co- operation in tapping into overseas resources and markets. Third， enterprises should foster risk prevention awareness and establish a complete risk alert， management and control system. In addition， an effective communication mechanism needs to be put in place for gold enterprises scattered around the world.

China ranks first in gold production and sales， but it has not gained pricing power and a voice that match its status. How do you think Chinas gold industry should proceed？

When a nation plays a bigger role in gold production and control， it always enjoys a louder voice in the trade. Exploring the Belt and Road markets， which are marked with abundant resources and robust demand， makes it possible for China to have a larger say in the global gold industry.

First of all， China should nurture a batch of competitive mining enterprises and encourage them to pursue transnational gold production. Take China Gold for an example. The company has developed mining projects in countries such as Kyrgyzstan and Congo. Aside from that， to gain more pricing power， the nation could cooperate with exchange centers along the routes to launch yuan-denominated gold products or attract more investors to conduct transactions on the Shanghai Gold Exchange and Shanghai Futures Exchange. Since April， the Shanghai Gold Futures Contract has been listed on the Dubai Gold and Commodities Exchange.

Gold is commonly taken as quasi money. How will the development of the domestic gold market fuel the internationalization of the yuan？

To begin with， gold is the most faithful asset； it will not depreciate or evaporate because of wars or disasters. Its the ultimate method of payment and the last bastion of fi nancial security.

Its a symbol of national strength， and reviewing history， we can fi nd great powers always value gold reserves and control over gold. In the context of globalization， gold props up the credit of a nations currency and underpins national confi dence.

A case in point is the permanent members of the United Nations Security Council. The United States holds 8，133.5 tons of gold in reserve， accounting for 74.2 percent of its foreign exchange reserves； Russia has signifi -cantly increased its gold reserves since 2006， so far accumulating 1，615.2 tons and now ranking seventh in the world.endprint