Gold Holdings Have Only Just Begun For China.

Despite recent holdings, China is still low in gold. The central bank began issuing monthly data on gold reserves in June last year. Gold reserves jumped 57.3% during the current period and have increased by 10.6% since then. In the past 14 months, the Central Bank of China has increased 175.1 tons of gold, which is only 262.6 tons behind Russia, equivalent to 48.7% of the total world gold reserves in the same period. As the largest gold mining country in the world, China does not seem to have enough gold. The central bank can buy gold through two markets at home and abroad. At present, Switzerland, Hongkong and South Africa are the main source of gold imports in China.

From the peak of US $3 trillion and 990 billion in June 2014 to US $3 trillion and 190 billion in August 2016, China's foreign exchange reserves decreased by 20.2% - although 31.3% of the decline was due to the negative valuation effect of exchange rate fluctuations. Over the same period, China's gold reserves increased sharply from 1054.1 tons to 73.9% tons to 1833.5 tons, forming a clear contrast. Compared with other countries, is China's gold holdings large?

Nevertheless, China gold Reserves are currently only sixth of the world, equivalent to 75.1% of France (fifth) and 22.5% of the United States (No. 1). From the perspective of the ratio of gold reserve to GDP, China is only 16.9% of France and 38.5% of the United States. From the perspective of the ratio of gold reserves to population, China is only 3.5% of France and 5.3% of the United States. Gold accounts for 2.4% of China's reserve assets, much lower than France's 66.5% and US's 75.6% (Chart 5). As the largest gold mining country in the world, China does not seem to have enough gold.

The central bank's holdings of gold may help to diversify investment in reserve assets. 97.1% of China's reserve assets are foreign exchange reserves, accounting for about 29.4% of the world's foreign exchange reserves. Therefore, interest rate and exchange rate fluctuations in reserve currency issuing countries will impact China's national wealth, not to mention the negative interest rate of a large number of sovereign bonds. The diversification of Reserve Investment naturally requires increasing the allocation of gold in the portfolio.

Supporting RMB reserve currency Status enhancement. The position of the US dollar in international reserve currency is closely related to gold. Under the Bretton Woods system, the US dollar directly linked to gold and played a positive role in replacing the pound with the US dollar as the main reserve currency. After the breakup of the Bretton Woods system, the United States still sits on the world's largest gold reserve, accounting for 24.7% of the world's official holdings. The increase in gold reserves can further consolidate the market. RMB The confidence in China and the internationalization of RMB will in turn reduce China's holdings of foreign exchange reserves.

Paving the way for commodity pricing. In April of this year, China launched the RMB benchmark gold benchmark price ("Shanghai gold"), which was determined by the Shanghai gold exchange daily through two centralized bidding. Although this has not yet had a substantial impact on global gold pricing, with the internationalization of RMB, it will eventually help China acquire more precious metal pricing power. Official gold reserve is the basic safety net in the gold market.

Liang Hong predicted that, according to the average growth rate over the past 14 months, even if the gold reserves of the former official institutions remained unchanged, China would not be able to catch up with France, which was the top one before 2020. Such a large-scale gold purchase in China may push up the price of gold, which requires the central bank to choose the right time window and gradually increase its holdings. Besides buying, China should also participate more in gold production through overseas gold mining.