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September 23, 2009

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Gold campaign for rural areas

THE World Gold Council is planning what it calls an unprecedented campaign to encourage gold sales in rural China, where higher farm incomes and government stimulus programs are feeding demand.

"Rural areas showed better-than-expected demand for gold in the first half in China," said Gerry Chen, business development manager for China with the World Gold Council.

China is the only country in the world where the demand for gold jewelry has risen in the aftermath of the world financial crisis, the council said. Sales on the mainland rose 9 percent in the first half, while global demand contracted 8 percent.

But demand in China is unevenly spread.

"Gold demand was flat in Beijing, Shanghai and other first-tier cities, while consumption in rural areas showed surprisingly strong growth," Chen said.

He declined to break down figures and said details of the rural marketing campaign had yet to be finalized.

Throughout China, gold is considered a symbol of good fortune. In rural areas in particular, gold is used to celebrate weddings.

Prosperity is returning to many hinterland areas, where household spending and consumer sentiment are rising faster than in large urban centers.

About 59 percent of rural households said they planned to increase spending in the next 12 months, compared with 41 percent in big cities, according to a MasterCard survey released this week.

China has increased spending in rural areas as part of a comprehensive stimulus program to boost domestic consumption and counter a slump in exports, the nation's traditional engine of growth.

"The second half will maintain the momentum," said Chen. "It was hustle-bustle at the Shenzhen International Jewelry Fair last week. Retailers stood in long lines to do business."

The annual fair is deemed to be a benchmark for China's jewelry market. The busier the show, the bigger the sales going into the Chinese New Year. The fourth quarter is traditionally the high season for gold sales in China.

While it maps plans to stimulate sales in the nascent rural gold market, the council is expanding its urban campaign to promote high-end, designer 24-carat jewelry, which now accounts for 5 percent of China's total gold jewelry consumption.

The council wants to increase that proportion to 15 percent by 2012.


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