China, a major global gold producer and consumer, is currently amid a "golden era" for the development of its gold industry. It proved a gold reserve of 4,134 tons in 2005, ranking the eighth in the world; its gold output reached 224.05 tons, a surge of 5.5% over the previous year and ranking the fourth in the global output; and it consumed more than 300 tons of gold in the year, making it the third largest gold consumer. However, Chinese gold enterprises are facing an urgent need to be retooled so as to make themselves more competitive worldwide. On this very issue, "People's Daily" Overseas Edition Reporter Wang Mingfeng has interviewed Cheng Fumin, president of the China Gold Association. And the detailed account of the interview is as follows:

Gold industry stepping out of its sealed-off circle

Reporter: Would you give me an account of the present situation with China's gold industry reform?

Cheng: Gold, as a special product, has provided a strong prop to new China's economic rehabilitation and development over the past half century, and its gold industry has been subjected to special governmental protection and support. Along with an accelerated pace for economic globalization and its reform and opening up process, China has enabled its gold industry to gradually step out of its sealed-off circle, and a series of market-oriented reforms have been implemented with regard to the disposition of geological resources, investment setup and product management.

The gold industry's reform started with its sales sector. Gold trading has been orbited into a national, unified gold trade system and gold products have been shifted to the market sale from a unified purchase and monopolized management of the past ever since the Shanghai Gold Exchange was officially put into operation On Oct. 30, 2002. At the same time, enterprises have to compensate their mining rights with payment instead of being given free access to gold geological resources. Concerning industrial policy, the government gives policy support to key enterprises in a selective way and guides them onto the track of self-development. Nowadays, China still presses ahead its gold market reform. As for the next step, it will strive to effect a transfer from mainly a commodity trading to mainly a financial trading and from mainly a spot trading mode to mainly the derivatives trading mode, and will eventually open gold market in an all-round way under the precondition of steadily standardizing transaction, operation and regulation.

In the new situation, the Chinese government still supports and attaches great close importance to the healthy growth of its gold industry. It has worked out a range of measures, such as doing away with the value-added tax on gold sales by gold mines, allocating a certain proportion of special funds for gold mine geological prospecting, arranging funds from national bonds to inspire the exploitation of low-grade and refractory gold mines and for developing turn-key technologies to locate deep subterranean mines. Such encouragement and supportive policies will surely spur a rapid, healthy growth of China's gold industry.

A batch of large gold corporations emerging

Reporter: Why should gold industry in China readjust its restructure?

Cheng: Out of various historical reasons, China's gold industry has all along had problems with irrational enterprise structures and low intensive standards. There are a large number of enterprises, which are small in scale with a low industrial concentration. Among the 1,200-strong existing gold mines, 739, or 61% of the total number, are small mines with a daily processing capacity of less than 50 tons of ore. So China's gold industry cannot give scope to its scale management efficiency and can hardly apply or spread advanced technological processes, and the risk-resisting capability of enterprises is low. To cope with these problems, the Chinese government has made the policy decision to carry out an overall, strategic revamping of the country's gold industry.

Measures involved in the relevant Chinese government policy are, among others, to unify the plan for key gold-producing areas, introduce scale management, and cut the number of small mines, so as to form a stable gold production base; to form gold production centers with stable yields, to develop big firms, prop up large-scaled enterprises in terms of geological exploration, technological retooling, and transfer of geological findings, so as to enhance the ability of large-scaled gold firms in leading the overall growth of gold industry; intensify the regulation on gold trade, crack down on illegal exploitation of gold resources in accordance with law, shut down illegal gold mines and those small mines with disorderly exploitation, grave pollution and outmoded technology and, ban undocumented mining, cross-border mining, illegal transfer of mining rights and other contract violations. And an initial success has been scored in this regard.

Through integration, merger and re-pooling of assets and share-holding reform, a host of gold enterprise groups have come to the fore. A gold production setup led by major gold conglomerates has taken shape, which includes the China Gold Group, Shandong Gold Group, Shandong Zhaojin Group Co. Ltd., Zijin Mining Co., Ltd., Lingbao Gold Co. Ltd. China encourages investors from overseas to partake in reorganizing and transforming state-owned gold firms and it sincerely hopes that the pace for the retooling of gold firms will be hastened by the introduction of overseas funds, advanced technical-how and managerial expertise.

Financing channels for gold exploitation being widened

Reporter: What changes will be brought to China's gold industry during the period of "11th Five-Year-Program" (2006-2010)?

Cheng: In the "11th Five-year Program" period is an era of a fast growth for the development mode of China's gold economy, with a great change to be effected in its traditional mine-running model. On the one hand, the state will no longer assume the main role of a unitary investor. And it is a matter of urgency to broaden and widen the financing channels for gold exploitation and explore new models of gold mining development and working capital operation. A huge input required by China's gold mining development has to be pooled by varied channels with diversified and market-oriented operations. On the other hand, the gold industry has to alter its gross, extensive economic growth mode of high consumption and low efficiency and to embark on a new road for industrialization with intrinsic connotations. It must transform and upgrade traditional industries through scientific and technological progress, an increase in the efficiency of resource use, further lower energy and raw materials consumption, protection of ecological environment, and take a road for the economical, clean and safe development of gold industry.

In recent years, China has ascertained a large number of low-grade and refractory gold resources in Guangxi, Guizhou and Yunnan triangle area, Ailaoshan Mountains in Yunnan Province, northern Sichuan and Gansu provinces and eastern Liaoning Province. With unremitting efforts of its scientists and technicians, China has acquired the refractory gold processing technology and completed three bacterial oxidation pre-treatment plants and put them into operation; roasting and compression pre-oxidation technology have been applied to industrial operation; China has, for the first time in the world, succeeded in coping with refractory ores with the use of chemical oxidation pretreatment technology and has scored very good successes. Moreover, the country has patented with the technology of bacteria pretreatment and scaled the advanced world standards in biological cultures, temperature adaptation, and concentration of oxidation pulp. It will also work to further improve the relevant laws and regulations about foreign input introduction, better the investment environment and welcome foreign investors to explore low-grade and refractory gold resources through the establishment of joint ventures or cooperative enterprises.

Helping enterprises to "go overseas" as quickly as possible

Reporter: How to step up the credibility of Chinese gold enterprises?

Cheng: The reform and opening up of gold industry has broadened the vision of Chinese gold firms and increased their contact and exchanges with counterparts overseas. Meanwhile, it has also raised a still higher demand of self-development capacity for itself. China Gold Association takes the lead in building up the credibility of the country's gold industry, pioneers honest and trustworthy operations, such as going in for lawful business management, abiding by contracts, offering quality products to clients, and undertaking their social responsibilities and obligations.

China Gold Association will continue to play its role of communicating, coordinating and serving China's gold industry and strive to "bond" and "bridge" international cooperation of gold enterprises worldwide. Moreover, it will help attract local and foreign firms to invest in gold industry, help domestic enterprises to "go overseas" for cooperation with foreign firms and contribute its due share to the development of China's gold industry.

By People's Daily Online