Numismaster.com has a great article from Pat Heller today.

By Patrick A. Heller
August 06, 2010

Over the past several years, the government in China has set up infrastructure to enable the nation’s citizens to purchase physical gold. It has also periodically issued pronouncements urging the public to buy gold. During this time, the Chinese government has been a stronger advocate of the private ownership of gold than any other country.

This effort to increase domestic demand is above and beyond the huge amounts of gold that China’s central bank has added to its reserves since 2003.

One thing you have to keep in mind about the potential demand for gold in China is that there are not the social (government) safety nets as there are in the United States.  As a result, the Chinese save more than 50 percent of their income as “insurance.” Compared to the typical American, the average Chinese citizen has a huge amount of funds available to allocate to purchasing gold.

There have been significant problems with Chinese citizens being able to acquire physical gold. There are simply too few outlets carrying insufficient inventory.  From 2007 to 2009, private physical gold demand in China quadrupled from almost 580,000 ounces to more than 2.3 million ounces. I have heard multiple stories of people having to wait in line at gold stores for as long as four hours in order to make a purchase.

On Aug. 3, the People’s Bank of China announced several developments to broaden access to gold for private citizens and increase competition in the markets.

According to a statement posted on the PBOC website, more commercial banks will be authorized to import and export physical gold.  In addition, the banks will be encouraged to offer yuan-denominated gold derivatives, which would provide paper evidence of the ownership of some of the rights of owning physical gold.

Click here to read the full article….