BEIJING, May 6 (Xinhua) --
Though credited with stabilizing gold
price, the recent gold-buying spree in
China reveals a lack of investment
options for Chinese households looking
to retain asset value.
Despite
a new price swing, the precious
metal will stay buoyant at 1,542
U.S. dollars per ounce for 2013,
thanks in part to strong retail
demand from China and India, predicted
HSBC recently.
Chinese households
came under the spotlight with their
generous purchase of the yellow metal
amid a growing chorus to short-sell
gold to shore up the dollar and
the U.S. economy.
Chinese
buyers have swarmed into retail stores
in the mainland and Hong Kong
over the past two weeks, snapping
up 300 tons of gold, according Chinese
media reports.
Yet spot gold
transactions, though resurgent after gold
took a dip, can have little
impact on gold price, according to
Zhao Xijun, deputy dean of the
School of Finance, Renmin University
of China.
"We all know
gold can retain or even increase
the value of assets. But we can
only afford to buy gold accessories
and gold bars," said a woman
surnamed Cai, a resident of north
China's Tianjin City.
The
rush for bargains embodies the limited
choice Chinese households have when it
comes to investment.
With an
under-performing stock market, tightly
controlled property sector and low
interest rates, Chinese households have
scant options to invest their money
for better returns.
While trust
fund and insurance companies offer
investment opportunities, they either have
a threshold too high for ordinary
households or can not allow investors
to withdraw their money for emergency
use, leaving people like Cai with
very few choices to seek returns
on their assets.
Money supply
in China exceeded 100 trillion yuan (16.13
trillion U.S. dollars) at the
end of the first quarter this
year. Inflation fluctuated along the
benchmark interest rate in the same
period, adding concern that assets in
the form of bank deposits may
not keep up with price
hikes.
China has seen a
boom in wealth management products
(WMPs) and off-balance-sheet financing that
promise better returns for investors.
The value of bank-issued outstanding
WMPs in China stood at 7.6 trillion
yuan at the end of 2012, with
an annualized return rate of 4.11
percent, about one percentage point
higher than fixed one-year interest
rates.
However, this high-yielding
alternative to traditional bank deposits
has raised suspicion as they are
believed to be increasingly used to
repay loans whose borrowers would
otherwise default.
Such concern
grabbed national attention late last
year when a WMP sold by Huaxia
Bank failed to pay its annualized
return and a product offered by
CITIC Trust delayed
payments.
Those cases prompted
moves by China's banking regulator
to tighten oversight over WMPs to
increase transparency and reduce
risk.
Despite potential risks
in these products, bank-offered WMPs
remain a popular choice among
investors.
However, these products
are favored not for their ability
to manage assets, but instead out
of the belief that banks will
bail out should losses occur, said
Lei Wei, a financial expert with
the Development Research Center of the
State Council.
That's what
makes Cai and many others think
banks' offerings are a much safer
choice.
However, experts think
differently, saying a high yield
always comes with high
risks.
"The chase for a
better return without accepting corresponding
risks will bring distortions to the
wealth management market," Lei
said.
Regulators should step up
oversight and create multi-layered wealth
management business that match returns
with risks, added Renmin University's
Zhao.
（Editor：MaXi、Gao
Yinan）
