Dubai’s gold traders are increasingly targeting China as global volatility hits domestic consumer demand. China was the world’s largest gold producer, second-largest consumer and fifth-largest holder of reserves in 2008.

The Dubai Multi Commodities Centre’s (DMCC) gold trade through Dubai topped $14.69 billion in the first half of 2009, a 12 per cent increase on 2008. A total of 300 tonnes of gold was imported, a 13 per cent increase, while exports grew 19 per cent to reach 213 tonnes.

At present Switzerland and Iran are Dubai’s top gold importers, but trading opportunities with China are growing due to an increasingly liberalised and competitive retail market and range of two-way initiatives.

“China is our best bet right now,” said Harendra Kailath, director for gold at the DMCC. “I would say that China has the highest demand for gold and this will help jewellers in the UAE make up for the losses they may have seen in the local market.”

These strong commercial links will be clearly evident at the 14th edition of Dubai International Jewellery Week, which will be held at the Dubai International Convention and Exhibition Centre on 4-7 November 2009.  There will be 10 countries participating as groups with three debutants in the form of Japan, the US and China.

“Given the current economic climate, it is a positive sign for the region when we welcome three new country pavilions, especially China. Dubai International Jewellery Week will provide an excellent platform to develop new business opportunities and cement existing ties,” said Trixie Loh, senior vice president, Dubai World Trade Centre.

To provide a focused environment, the show is split into three distinct vertical sectors namely: jewellery trade Dubai, jewellery collections Dubai, and Areeq Dubai. These three tailored events deliver focused forums for traders, consumers and exhibitors with more than 400 exhibitors from over 20 countries.

Underscoring improved trading links between Dubai and China, earlier this year, DMCC hosted a high-profile government and trade delegation from Shenzhen in China to examine bilateral trade opportunities in a range of commodities.

Chinese eager
Following the DMCC’s participation at the Asia Gold Focus 2009 Conference in Guangzhou, Chinese gold and jewellery manufacturers are now increasingly eager to work closely with Dubai-based companies. In April last year, the DMCC signed a Memorandum of Understanding with Shanghai Financial Futures Exchange. Guangzhou has a flourishing jewellery processing and manufacturing industry, with production bases spread across Panyu where UAE firms have set up factories in Huadu and Conghua.

Many investors still regard gold as an effective hedge against volatile currency trading and see it as a safe haven and valuable inflation-hedging instrument during times of recession. Indeed, this has been one of the main drivers in the Chinese market, which has seen increased numbers of consumers buying 24 k gold jewellery. Little surprise then that gold prices have risen above $900 an ounce, compared with a low of $680 last October.

There are more than 39 major gold jewellery manufacturers in China. Pure gold manufacturers in Shenzhen produce around 70 per cent of gold jewellery in China and Bai Tai, Yuehao, Jinye, Gold Dragon, Cui Liu and AnShenghua are among the top manufacturers.

The UAE’s Asian ties extend to Singapore, which exported about S$5.7 billion ($4.01 billion) worth of jewellery and precious metals last year, an increase of nearly S$2 billion from 2007 – much of which was spurred by UAE demand.