Labor, capital-intensive jewelry sector embracing high tech and automation
The Chinese people have a long history of loving gold, as the earliest trace of the precious metal was found in a royal tomb dating back 3,000 years. Yet, the modern, private gold industry is surprisingly young.
"In the early 1990s, Yantian was nothing but a shabby village of migrant workers," said Zhou Taolin, founder of gold jewelry maker Batar Group, referring to Yantian district of Shenzhen, Guangdong province, neighboring Hong Kong.
Batar is widely considered the West Point of China's gold industry for its legendary development history. Zhou himself has witnessed the industry's entire journey in China.
"I moved from Hong Kong to Yantian in the 1990s because it was the only bonded area that allowed us to trade gold," he said.
In the 1990s, gold trade was strictly State-controlled and was not open to the private sector elsewhere in the country.
"It was crucial for us that we had a very helpful, friendly and efficient local government to support our business, because back then everything was awaiting reform, and we had no precedent to follow," Zhou recalled.
"Nowhere else was doing what we did, but Shenzhen is a place of innovation－its business environment was always excellent and the local government is very open-minded," he said.
When the country finally opened the gold industry in 2002 with the establishment of the Shanghai Gold Exchange, Batar had already obtained a leading position in the market.
Currently, it produces 200 metric tons of gold accessories every year, which means one in every five items of gold jewelry in the Chinese market is from Batar.
Shenzhen, which has benefited from an early start in the industry, is the country's gold manufacturing base.
"We have gone through rapid growth in the past 10 years. Currently there are more than 6,000 registered companies and over 15,000 individual business owners in the city," said Guo Xiaofei, secretary-general of Shenzhen Gold and Jewelry Association.
Guo sees the country's wedding custom of buying gold jewelry as a solid driver for the business.
"Every year, about 8.6 million couples get married. The demand for gold and jewelry is solid," he said.
"The main body of Shenzhen's jewelry industry is private business," Guo said. "From the early 1990s until now, the local government has always offered private entrepreneurs favorable policies."
The manufacturing and processing business in Shenzhen generates sales of 150 billion yuan ($21.9 billion) every year, according to Guo, while the retail and wholesale market accounts for 45 billion yuan.
The entire gold industry in Shenzhen is worth 600 billion yuan, and growing, he added.
But being a young industry does not necessarily equate to being a good one. As the average age of its employees is getting younger, the young but traditionally labor and capital-intensive gold industry is facing headwinds.
"It takes years to become a craftsman. Young people prefer to become white collar workers in office buildings rather than staying in a factory, even if you pay them more," Zhou said.
"It's becoming harder and harder for a traditional industry like us, both capital and labor-intensive, to make a profit nowadays."
Fang Zhiqiang, marketing director of Yuehao Jewellery Co Ltd, shared similar thoughts.
"People think the gold industry is a super-rich club, but it's not," he said. "For each gram of gold, the profit is less than 0.1 yuan. We make money purely relying on quantity."
"I have seen the wild and aggressive growth of the gold industry in China," said Chen Zhijun, director of business development at the World Gold Council. "There are fewer and fewer workers born after the 1980s and 1990s engaging in the industry. One challenge is forcing the sector to upgrade and adopt industrial automation."
Yet, this inevitable trend is gaining traction in the industry.
"We learn fast," said Zheng Huanjian, vice-president of Ganlu Group, a gold jewelry company based in Shenzhen. He said the company is learning about the latest technology and craftsmanship from its foreign peers.
"We are trying to turn the capital and labor-intensive industry into half automated, and that is what the future will be about for sure," Zheng said.
"Lowering costs is one reason, but more importantly, it is about raising the standards. We can only talk about standardization when we have automated production with machines.
"The tradition in the gold industry is that apprentices learn from experienced craftsmen, but now we are focusing more on training programs for design, and research and development," he said.
Zheng forecast that the gold jewelry will split along two lines, into those who rely on traditional craftsmanship and those who rely on commercialized automated mass production.
"In the future, the gold industry won't be as labor-intensive as it is now," he concluded. "It will be hightech driven and automated, with more and more young people willing to be part of it."
"What we can do if the young people don't want to join this industry?" said Zhou. "We have to adopt automation, we have to buy the best machines and develop our own core technology, and that is the way out."
"But it is also about passion," Zhou said. "The gold business is about capital, labor, technology and also aesthetics," he said. "If you don't have passion for it, you won't be in the industry."
