Chinese jewelers spread inland spurred by spike in consumer demand for gold

China's jewelry stores are expanding into smaller inland cities as demand for gold rises amongst the country's increasingly affluent consumer base.

Reuters reports that while jewelry stores have long been ubiquitous features of commercial districts in China's booming coastal cities, sellers are now spreading to traditionally less developed 3rd and 4th-tier cities where local economies are belatedly maturing.

According to Leon Zhao of research firm Frost & Sullivan 3rd and 4th tier cities will in future "be the main engine of China's jeweler market," with the company projecting that cities at the third-tier and below will comprise over 40% of the Middle Kingdom's total jeweler market by 2015.

Leading regional jewelers have already taken notice, with Chow Tai Fook Jeweler Group (HK:1929) of Hong Kong opening half of its new outlets in the fiscal year commencing in April in 3rd and 4th-tier municipalities , primarily in central and western China.

Jewellery continues to comprise the bulk of Chinese spending on gold, accounting for two-thirds of demand last year with the remainder taken up by investment purchases. Gold remains popular as a gift for traditional celebrations such as weddings, while more sophisticated consumers in the big cities are also cultivating a taste for platinum.

China's increasing predilection for gold has been a significant factor in the precious metal's recent price spike. The country currently vies against India as the world's biggest gold market, with consumption rising 13% year-on-year in 2011 according to World Gold Council figures.

Data also indicates that China was the biggest gold producer in 2011, with some speculating that the country is becoming a "bullion superpower" and accumulating immense reserves on the sly, as evidenced by the sheer scarcity of exported Chinese gold bars.