GOLD: China Overtakes India (Courtesy:Nidhi Nath Srinivas, ET Bureau)

In 2009, China bought more gold than India, making it the world’s top consumer. China pipped South Africa in 2007 as the world’s largest gold producer.

Since 2003, Beijing has been buying most of the gold excavated and refined locally. It was a perfect strategy. No one in the international market became the wiser and the bill was paid in yuans. Today, China has more than 1,000 tonnes in its official vaults, up 75% in six years. Its gold reserves are now the fifth-largest among national central banks after the US, Germany, France and Italy. This insurance helped mandarins in Beijing sleep easier at night.

Of course, each Chinese family is still buying only a few grams, given high prices and limited incomes. But added up, consumption would cross 430 tonnes this year, 10 tonnes more than India, says consultancy GFMS. Over the next decade, more Chinese will buy gold, at a time when inflation is almost certain to be high, adding to its appeal. In short, China can permanently alter gold’s global demand-supply equation.