China wants larger gold reserves than US

China aims to build up a larger gold reserve than the United States, Koos Jansen writes Bullionstar. Song Xin, president of the China Gold Association, wrote in a submitted article on July 30 on Sina Finance that China should gradually increase its gold reserve, first to 4,000 and later to 8,500 tons. That is more than the more than 8,100 tons of gold that the United States has at its disposal, according to official figures.

"Gold is the ultimate money in all circumstances and will support the Chinese renminbi as an international currency. Gold is the material basis for modern fiat money", Xin notes. He goes on to write that gold is the only monetary asset outside of national sovereignty.

Xin also notes that gold is the only asset that will be accepted for international payments in extremis. Although the international situation is still fairly stable at the moment, conflicts and local wars can cause gold to become the only accepted means of payment, writes the president of the China Gold Association in his submission to Sina Finance.

Gold to support the Chinese yuan

Xin notes that China needs to have enough gold for the renminbi to be accepted as an international currency. "It is very important that there are sufficient gold reserves to improve the credibility of the yuan."

The United States has more than a quarter of the world's public gold reserves. Europe also has a large gold reserve of around 10,000 tonnes. The United States has about 70% of its reserves in gold and in European countries the percentage is between 40 and 70. By comparison, China still has little gold, only one percent of its total reserves. That's why China wants more gold, Xin writes.

In order to accumulate that large gold reserve, several things need to happen. In addition to direct purchases by the People's Bank of China, the Chinese government must do three things to achieve growth in gold reserves, according to Xin.

• - Firstly, the control of gold imports must be relaxed. Banks are needed to import the gold, and refining capacity is needed to be able to import unrefined gold as well.
• - The second step is to set up a national gold stock fund, similar to sovereign wealth funds in some other countries. Such a fund may be under the control of the State. Buy gold.
• - The third step is to set up an infrastructure of gold banks that can take care of the financing, storage and leasing of gold. Also, such banks can introduce instruments that make it possible to trade in paper gold.