Stories Behind Panda Gold Coins

By Hu Fuqing
http://www.jibi.net/News/qbqbcx/8_19_9_200.html

This year marks the 30th anniversary of the release of panda gold coins. With the celebrations under way, the attention to panda gold coins will intensify. I would like to recount the early stories of the 20th century Chinese panda gold coins which I am aware of, hopefully to bring a historical perspective for the designers and manufacturers of Chinese panda gold coins, as well as for collectors.

The release of Chinese panda gold coins was a monumental moment, but before their release, what strenuous efforts were made by the government agencies without publicity? This is exactly what this article is about. Without the groundbreaking efforts, there would not have been any Chinese panda gold coins.

Prelude

When the Great Cultural Revolution was brought to an end in Mainland China, the plan to mint commemorative coins ranked among the key technological programs of the Print Administration of the People's Bank of China (the predecessor of the current China Banknote Printing and Minting Corporation). The details included:

1.   The designs would focus on significant and memorable events in China, such as portraits of the previous generation revolutionists and the historical sites where they engaged in revolutionary activities as well as their monuments; famous ancient and modern writers and scientists; and well-known historic buildings.

2.   Efforts would be made to research and improve artistic and technical expertise in the design, engraving and die making of commemorative coins, with the state of the art in the world as the goal – unique, exquisite, and graceful. The coins would have denominations on them, and the shape could be round or multi-sided.

3.   In terms of the material, research should be mostly done on coins of 99.9% gold and silver, in singles or sets.

4.   The design of the first pattern to be reviewed should have the completion of the Chairman Mao Memorial Hall as the theme; otherwise there would be no restrictions. The pattern must have the text "People's Republic of China" on it.

The leadership and the engineering and technical staff of the then Shanghai Mint (state owned Factory 614) responded with enthusiasm to the call from the leaders of the Printing Administration. The Party Committee decided to trial mint commemorative coins for the anniversary of Chairman Mao's death, called Product "990", which was to be completed by September 9, the first anniversary of Chairman Mao's death. Two teams were organized for this purpose: the first team was led by engineer Yan Yangsheng, with three assistants (Chen Fuquan, Yan Zhaolin Jin Huaqing). (Some text missing here- translator) based on the engraving from Birmingham Mint in England. The team lead was designer/engraver Luo Xingsha.

The Director of the Printing Administration at that time, Yang Bingchao, visited the Soviet Union, and brought back from Saint Petersburg Mint samples of the high relief Lenin commemorative medal. He called for honing of technical skills, to mint gift coins with portraits of the great leaders, and to engrave great Chinese leaders on the coins of RMB.

In order to hone the skills of engraving on coins, Mr. Zhu Dechun got in touch with Professor Zheng Ke of the Central Institute of Arts and Crafts, for him to give a training class on engraving, with the support of the leadership of the Printing Administration. Professor Zheng gave lectures in person, and coached trainees in making engravings.

I was lucky to be one of the formal trainees, thus witnessing the period  from the very start to official trial minting of commemorative coins by the coin minting industry. Shanghai Mint (state owned Factory 614) sent 6 designers/engravers to this important engraving training class, but the Shenyang Mint was absent due to some unknown reason. It was a regrettable decision, because they missed an excellent opportunity to improve engraving skills. During the training class, the Chairman Mao Memorial Hall was under intensive construction. The leadership of the Administration of the Chairman Mao Memorial Hall and those of the construction companies all wished to mint a number of commemorative coins for the Chairman Mao Memorial Hall. This idea struck home with Shanghai Mint's (state owned Factory 614) "990" project. A trial run was performed with success using Shanghai Mint's production line for Chairman Mao badges. The commemorative medals included the engravings of the Chairman Mao Memorial Hall and Chairman Mao seated. On September 9, 1977, which was Chairman Mao's death anniversary, Shanghai Mint's 990 project produced designs on time. After careful engraving and technical adjustment, patterns were formally submitted to the Printing Administration on December 20, 1977.

People joked that the 1977 engraving training class was the "Huangpu Military Academy." There is some truth to it. Many key designers/engravers in the minting industry "graduated" from this training class.

High Level Decisions

Back in April 14, 1978, a team from Shanghai Mint went to the Printing Administration to report on the trial minting of Chinese commemorative coins. On the morning of April 17, Director Yang Bingchao advised that a meeting was to be held in the office of Geng Daoming, Vice Governor of the People's Bank of China. In addition to Vice Governor Geng and Director Yang, there were Zhu Dechun from the Technology Department of the Printing Administration, Wu Hanlu, a researcher from a related department, Director Qian Zhenlin of the Non-Commercial Department of the Foreign Bureau of the BOC, and Zhao Chengan, Vice Governor of Po Sang Bank in Hong Kong. Vice Governor Geng made it clear that Chinese commemorative coins were to be made, to assist in tourism for foreign visitors in an effort to promote China and to earn foreign exchange.

The purpose of the meeting was investigation and research, to fully assess domestic and international demands, and to study the report to be submitted to the State Council, based mainly on the briefings of Vice Governor of Po Sang Bank. Li Xiannian, Vice President of the PRC, also instructed the Governor of BOC, Li Baohua, to push for commemorative coins.

On the domestic front, the office of Liao Chengzhi in the Ministry of Foreign Affairs called to ask whether the BOC could provide Chinese commemorative coins. At that time, a retired Defense Minister from Luxemburg was visiting China. He happened to be a seasoned coin collector, and was eager to obtain some Chinese commemorative coins. But there were no commemorative coins available either as gift or for purchase. The Ministry of Foreign Affairs called Po Sang Bank in Hong Kong for commemorative coins, but Po Sang Bank had none either.

The Cultural Revolution had drawn to an end by then, and foreign interactions were picking up. Some patriotic overseas Chinese suggested, after they learned about this story upon visiting China, that they pay the cost and supply the gold for China to mint commemorative coins. They would bear all the costs, and split profits half-half with government agencies involved. Some foreign friends also made similar proposals, with design elements such as China's emblem and country name to be approved by China. They also wanted to bear all the costs and split sales profits half-half. Wuhan City had exported a batch of old gold coins. Their melt value would have been RMB80,000, but the sales revenue reached more than RMB400,000. Shanghai sold some banknotes from the Qing Dynasty as waste paper, but brought in RMB6,000 instead. All in all, the collection market was prospering with increasing stability in the country after the Cultural Revolution.

In view of all the facts above, Vice Governor of the BOC Geng Daoming made it clear that China would market its own commemorative coins. First, the design had to be highly artistic; secondly, the workmanship had to be superb; thirdly, the decorative accessories had to be beautiful. Vice Governor Geng also mentioned that three tons of gold would be allocated the next year (1979), and weight of the commemorative coins would be around 1/2 ounce. They had to be an instant hit.

However, the Chinese government banned Renminbi from export in the 70s of the last century. Even if the commemorative coins were made, whether they could be sold overseas was a big challenge. Despite all these uncertainties, the step had to be made. So a fool-proof plan was made: commemorative gold and silver medals would be made first, while commemorative gold and silver coins were also in preparation. Both series would be submitted to the State Council. If the medals were allowed to carry denominations, they would become commemorative coins. The commemorative medals would be minted to proof standards anyway, using the minting technology of commemorative coins. Denominations on the coins was another big policy issue. The BOC instructed departments involved to check the international market for all the details.

After the meeting chaired by Vice Governor Geng Daoming, Director Yang Bingchao of the Printing Administration called another meeting on April 19, 1978, to study the implementation of the plan. The participants were Qiu Weimin of the Production Department of the Printing Administration, Zhu Chunde of the Technology Department, Mr. Tang, engineer of the Construction Department, and Ye Bolin from Shanghai Mint (state owned Factory 614). The meeting designated the Department of Production as responsible for the project, assisted by the Department of Technology. On April 24, Ye Bolin returned to Shanghai, and reported the decisions of the two meetings to the factory's Party Committee and the Revolutionary Committee. The leadership immediately decided to take actions. After his briefing, several decisions were made at the meeting: re-allocate workspace, add equipment, reinforce staffing, assign duties, and specify responsibilities. The purpose was to straighten out the internal process within Factory 614 for smooth execution. The meeting took seriously the message from the April 17 meeting called by Vice Governer Geng, and tentatively decided on Beijing scenery as the theme for the commemorative medals. In the afternoon of May 30, Factory 614 called a meeting for design and engraving, followed by 8 more special meetings, to seek consensus, specify tasks and check the progress and quality of each task. 

It is no exaggeration to say that these concrete steps laid a solid foundation for the release of China's panda gold coins.

Background of International Market for Investment Coins

China's panda gold coins are the only investment gold coins from our country. Talking about this type of investment BU gold coins, according to the definition of the global "Industry Directory of BU Gold Coins", BU gold coins are fiat gold coins specifically for investment in gold. The standard weight of BU gold coins is calculated in ounces, which is the universal unit of troy weight. A coin may contain one ounce of pure gold , or a fraction of one ounce (such as 1/2, 1/4, 1/10 or 1/20). BU gold coins can be minted in large quantities or without any quantity limit. The issuer releases them by adding a low premium to the price of the gold in the coins. The purity and technical specs are guaranteed by the government.

The first BU coins were minted in South Africa. In 1970, the South African Chamber of Mines officially launched the Krugerrand gold coins, which took over the gold investment markets in Europe and the United Sates shortly afterwards. In 1974, more than 3.2 million ounces of the South African Krugerrand gold coins were sold. Inspired by the sales performance of the South African Krugerrand gold coins, some developed countries released their own BU gold coins after 1979. This became the most effective means for the issuer country to earn foreign exchange with gold.

The chronological order of the countries issuing investment gold coins is:

South Africa, which first issued Krugerrand gold coins in 1970;
Canada, which first issued Maple gold coins in 1979;
Mexico, which first issued Liberty gold coins in 1981;
China, which first issued Panda gold coins in 1982;
The United States, which first issued Eagle gold coins in 1986;
Australia, which first issued Kangaroo gold coins in 1987;
Great Britain, which first issued British gold coins in 1987;
Austria, which first issued the Philharmonic gold coins in 1989.

Some other countries followed suit by issuing their own gold coins, such as Lion gold coins from Singapore.

Among the investment gold coins, China's panda gold coins were among the forerunners. The Cultural Revolution impacted a whole generation of the Chinese people, but the Chinese panda gold coins managed to keep up with historical development.

Internationally, sales of the 1 ounce BU gold coin account for 80% of all the BU gold coins in most cases. This shows the real popularity of the investment coin. In comparison, based on statistics before Year 2000, the sales of Chinese 1 ounce panda gold coins only accounted for around 49% of all the types. The reason might be that the Chinese BU panda gold coins were produced with more than BU quality and excellent workmanship. Many people had them for collection, not investment.

The international sales volume of the Chinese panda gold coins was relatively low (based on statistics before 2000). In 1989, the Chinese panda gold coins reached their peak sales of 254,000 ounces. In contrast, in the same historical period (end of the 20th century), the gold production in South Africa (average annual production) reached 75% of all the gold produced in Western countries. The South African Krugerrand BU gold coins reached 5 million ounces in annual sales in 1985. This left the Chinese panda gold coins far behind.

Starting from January 1, 2000, the EU countries waived VAT on gold investment products through legislation. This served as an important stimulus to the sales (market sentiment) of BU gold coins in the EU.

Design and Minting Technologies of China's Panda Gold Coins

The design on the 1982 panda gold coins was classical. Many design drafts were submitted for the Chinese panda gold coins of that year. Proposals varied. The observe had the national emblem, the Great Wall and the Temple of Heaven for consideration, and the designs for the reverse were more numerous. The design for the obverse was finalized on the Temple of Heaven. Many years of market reaction proves that the design of the Temple of Heaven on the obverse of all the Chinese panda gold coins was a successful pick. There was no objection whatsoever from anyone.

There was a specific reason why the first set of panda gold coins had no denominations. Li Baohua, the son of Martyr Li Dazhao, was the Governor of the People's Bank of China. He was very cautious about denominations on panda gold coins. Before the release of the Chinese panda gold coins, the commemorative gold coins for the 30th anniversary of the People's Republic of China had been released in 1979 with great success. The denomination was 400. With this precedent, why no denomination was added to the first set of panda gold coins? It was a historical mystery. When patterns were submitted for the first set of panda gold coins, the 1 ounce gold coin had two denominations, 350 Yuan and 400 Yuan, for selection by the leadership. As panda gold coins were investment coins, they would be released continuously each year as per international conventions. In contrast, other gold coins were issued once and for all, with no residual problems. Just for this reason, Governor Li Baohua was extremely cautious. After serious studies by the People's Bank of China, Governor Li Baohua finally decided on the four sizes of 1 ounce, 1/2 ounce, 1/4 ounce and 1/10 ounce for the first set of panda coins in 1982, out of his sense of responsibility for history and for the success of this investment coin project. These sizes were in line with international standards, too. He also decided not to add denominations to the coins. International market reaction would be watched for decisions on the denominations of the second set of panda gold coins, so that the configuration of the denominations on panda gold coins would be set more reasonably and more stably, which would benefit panda gold coins in the long run. That was why no denominations were added to the first set of China's panda gold coins in 1982. However, the first set of panda gold coins from 1982 are internationally regarded as China's fiat currency, only more valuable, as only the 1982 set enjoyed this special glory in history.

The emergence of panda gold coins resulted from the hard work by Shanghai Mint (state owned Factory 614). Although panda gold coins were BU coins, their minting process was no less than that of proof coins, thanks to the serious and meticulous work of those involved. That gave rise to the catch phrase in the industry: BU coins are more than BU (and proof coins are not proof enough). Proof versions of panda gold coins were also minted, those with a P in the panda design on the reverse.

Ways to Promote Sales of China's Panda Gold Coins

Compared with the sales of many BU coins in the world, the annual sales of Chinese panda gold coins are not great. If we take other factors into consideration, the disadvantage of the panda gold coins are even more obvious. Take the Canadian maple gold coin for example： the Chinese panda gold coins are higher in purity than the maple gold coins. The design on the reverse of the panda gold coin changes every year (except for 2002), while the maple gold coin keeps the same design year in and year out, with the Queen of England on the obverse and the Canadian maple on the reverse. Only the Year is updated. The minting quality of panda gold coins is next to proof coins, while maple gold coins are BU coins in the real sense. But in the end the Canadian maple gold coins still outsell the Chinese panda gold coins. In 1999, more than 4 million ounces of the American gold eagle coins were sold, while the Chinese panda gold coins only reached an annual sales volume of 50,909.05 ounces (fifty thousand ounces). This "Panda Phenomenon" is thought provoking.

Let's just focus on the design of the panda gold coins. It is a challenge by itself. So far we have more than 100 designs on panda coins (including proof panda coins in the past). It is no exaggeration to say that panda's postures are almost "exhausted". How far the design of panda gold coins can go remains to be seen. The design of the 2001 panda gold coins was awesome, which was reused in 2002, in the hope to fixate the panda design, so that only the Year would be updated annually. But the attempt fell through, with disapproval from dealers. We can say that panda gold coins are selling at low margins with high quality. As panda gold coins have very low premium, not much higher than the gold price, they are only profitable with large sales volumes. If sales lag, the profit is terribly low.

The basis of panda gold coins' price is the cost of gold. As a 17% VAT is added within China, and as the VAT is either waived internationally or charged at a much lower rate than in China, the marketing challenge is self-evident.

The time to market of panda gold coins is relatively long, in contrast to other international gold coins. The supply is slow, due to the processes of domestic banks and Customs. This inevitably tie down the capital of the dealers while exposing them to more financial risks at the same time. Internationally, dealers of BU gold coins would try their best to move their stock fast once it is replenished, or to secure buyers before the supply is delivered, in order to minimize the risk of cash tie-up. Vaults are set up in New York, Los Angeles and other locations for gold coin distribution. If the customer agrees to the price and pays for a purchase, he can directly take the delivery the next day with the invoice. It is a quick process which can greatly speed up the capital turnover of the dealer. On the other hand, it takes dealers of panda gold coins a week or even longer to receive the gold coins after price negotiation and payment. Sometimes customers cannot wait and turn to other BU gold coins in stock. Long delivery time is one of the constraints on the sales of panda gold coins.

Domestically, there is no control over the price of gold coins that dealers charge. This is especially true in big shopping centers, where panda gold coins are sold at exorbitant prices. This disqualifies panda gold coins as investment coins, and alienates most of the salary-earning investors.

Our international sales network for panda gold coins is far from strong. Take the example of the US Mint. The US Mint has tough requirements for dealers in their distribution network. Dealers applying for sales of the US BU gold eagle coins must submit some qualification documents, such as certifications from internationally certified financial firms and membership in major international commodity exchanges. The dealer's customers must be qualified to deal in gold in large quantities. The dealer's net asset should be no less than 5 million dollars, and each order should be 1,000 ounces at the minimum. These measures help in guaranteeing the annual sales volume of the US BU gold eagles. Major dealers of the US Mint include well-known financial institutions such as A-Mark Precious Metals, ScotiaMocatta Precious Metals, Republic Bank, MTB Bank, Deutsche Bank, the Sumitomo Corporation in Japan, Hang Seng Bank in Hong Kong, and Swiss UBS. Viewed against developed countries, our panda gold coin distribution network is still weak.

Another bottleneck to the sales of panda gold coins is the buyback channel. Globally, especially on the US and European markets, BU gold coins are well received as a gold investment vehicle because the society is wealthy. Dealers buy back gold coins while selling them, and are happy to make profits both ways. The buyback channel makes cashing out easy and convenient, which in turn attracts more investors to BU gold coins. But in China such buyback channels do not exist. People cannot timely cash out the BU coins they bought. The "investment coin" does not make sense as an investment.

These issues are constraints on the sales and progress of panda gold coins. Of course, as mentioned before, my article mainly touches on the state of panda gold coins at the end of the 20th century. Currently the market, the gold price and purchasing power of the Chinese population have significantly improved. Hopefully the conditions may have been more favorable.

Historical Contribution of Panda Gold Coins

The history of modern Chinese gold and silver coins is embodied in the growth of panda gold coins. In the past 30 years, panda gold coins scored many great successes.

Many of the technologies in minting modern Chinese commemorative gold and silver coins were used on panda gold coins first, and applied gradually to other coins afterwards. For example, the unique intaglio engraving technique won remarkable esteem in history. This technique was in use for 13 years, till the anti-sandblasting technology was adopted on the 1995 panda gold coins. Other technologies, such as local gold plating, gold inlay, color printing, and slanted reeding, were all first tried on panda coins.

Historically, panda coins were awarded the Best Gold Coin and Best Silver Coin multiple times in the American "Coin of the Year" competition. This award is regarded as the Oscar of numismatics.

Although panda gold coins failed to reach the top sales volume in the world, they brought in huge profits in the past 30 years, contributing significantly to the finance of the PRC.

Panda is the national treasure of the Chinese nation, and panda gold coins are the backbone of the China Gold Coin Co.

At the end of this article, I would like to give my heartfelt thanks to the individuals and organizations who helped the Chinese panda gold coins grow along the way. Among them are Luo Xingsha, Chen Jian, Sun Qiling, Fang Maosen, Ye Bolin, Zhu Dechun, Bian Yaohui, Yan Yangsheng, Yang Binchao, Geng Daoming, Martin Weiss (USA), Ms. Zhang Jiechang (USA), Shanghai Mint (state owned Factory 614) and Panda America.

(The author of the article is member of China Arts and Crafts Association, and member of the review committee of Coin of the Year)