UPDATE 1-China's May gold imports from Hong Kong drop to 16-month low
* China net May gold imports from Hong Kong 52.606 T vs April's 67.040 T
* Falling yuan saps demand for gold (Adds milestone and dealer's comments)
By Lewa Pardomuan
SINGAPORE, June 26 (Reuters) - China's gold imports from Hong Kong dropped in May to the lowest level since January last year as a weaker yuan curbed appetite for the precious metal in the world's largest consumer.
Hong Kong has been the main conduit for gold into China, but imports into the mainland have been increasingly shipped directly to Shanghai and Beijing, helping shroud the actual amount of the metal that enters the country.
As China does not report gold trade data, the Hong Kong figures are still the main route to gauge demand for the precious metal in the mainland.
Net gold inflows into China from Hong Kong fell 22 percent to 52.606 tonnes in May from 67.040 tonnes in April, according to data e-mailed to Reuters by the Hong Kong Census and Statistics Department.
That was the smallest import volume to China via Hong Kong since January 2013. It was the third straight month that imports fell.
"I think the main reason is because the yuan is depreciating and also at that time, Shanghai gold futures traded at a discount to the cash prices in London," said a physical dealer in Hong Kong.
"The anti-corruption drive may also play a role. People are not keen to show off their wealth and sales of luxury goods were not so good," the dealer said.
Total gold imports into China from Hong Kong dropped to 67.233 tonnes last month from 80.817 tonnes in April, the data showed.
Chinese banks imported a record 1,158.162 tonnes of gold from Hong Kong last year, when gold prices fell for the first time in 13 years.
Demand has now cooled from peak levels. That, combined with a weaker yuan, has driven Chinese gold prices to a discount to the global benchmark.
Spot gold has recovered from last year's rout, gaining nearly 9 percent this year to trade above $1,300 an ounce amid a shaky global economy and geopolitical risks.
The renminbi has lost 2.7 percent against the dollar so far this year as the central bank flushed out speculators, becoming one the worst players among its emerging market peers.
Chinese gold processing firms have since 2012 used falsified gold transactions to borrow 94.4 billion yuan ($15.2 billion) from banks, the country's chief auditor said.
Chinese firms could have locked up as much as 1,000 tonnes of gold in financing deals by the end of 2013, the World Gold Council said in April, indicating a big slice of imports has been used to raise funds due to tight credit conditions, rather than to meet consumer demand. ($1 = 6.2090 Chinese Yuan Renminbi) (Additional reporting by Manolo Serapio Jr; Editing by Muralikumar Anantharaman)