by Koos Jansen, Bullion Star:
The Chairman of the China Gold Association and General Manager and Party Committee Secretary of China National Gold Group Corporation, the latter being China’s largest gold mining enterprise, is Song Xin and happens to be one of my favorite commentators in China. This gentleman made waves in July 2014 when he candidly wrote on Sina Finance that the People’ Bank Of China (PBOC) should slowly raise its official gold reserves to 8,500 tonnes, more than what the US Treasury claims to hold. The article was published in Chinese but translated by BullionStar to share the views by Song Xin with the English speaking world:
For China, gold’s strategic mission lies in the support of renminbi internationalization, and so let China become a world economic power and make sure that the China Dream is realized. … gold forms the very material basis for modern fiat currencies.
Gold is the world’s only monetary asset that has no counter party risk…
That is why, in order for gold to fulfill its destined mission, we must raise our gold holdings a great deal, and do so with a solid plan. Step one should take us to the 4,000 tonnes mark, more than Germany and become number two in the world, next, we should increase step by step towards 8,500 tonnes, more than the US.
In the next translation further below you will read more on how Song Xin views gold’s role in China’s financial strategy. The bullet points from the article:
- China continuously accumulates gold reserves to support and accelerate renminbi internationalization.
- Renminbi confidence and gold are closely related. Gold reserves are the cornerstone for renminbi internationalization.
- In modern times gold plays an important role in managing economic risk and maintaining China’s financial safety.
- China is continuously increasing its official gold reserves in conjunction to joining the SDR.
- The ratio of China’s official gold reserves to its GDP should be more in line with the US and other developed countries. At this moment China’s official gold reserves are still relatively low.
- The Silk Road economic project, also called “One Belt and One Road” (OBOR), has huge development opportunities for the Chinese gold industry. Song Xin mentions that the in ground gold reserves of countries along OBOR reach 21,000 tonnes. In 2015, witnessed by Chairman Xi Jinping and President Putin, China National Gold Group Corporation and Russia’s largest gold mine Polyus have signed a strategic cooperative agreement and they are promoting detailed relevant cooperative issues at present.
What he didn’t mention is that China is striving to boost gold trade along OBOR to be settled in renminbi through the Shanghai International Gold Exchange.
Is The SDR A Means Or And End For China?
In the mainstream media we often read China wants the SDR to replace the US dollar as the world reserve currency,based on statements from PBOC Governor Zhou Xiaochuan – among others:
Special consideration should be given to giving the SDR a greater role. The SDR has the features and potential to act as a super-sovereign reserve currency.
Since 2009 China has vigorously pressured the IMF for renminbi inclusion into the SDR. Finally, in 2015 the IMF decided the renminbi would be added to its currency basket in October 2016.
Zhou and other prominent economists at the PBOC are clearly pushing the SDR, but what’s China’s exact strategy?
In advance of the official inclusion of the renminbi into the SDR, which will take place on October 1, 2016, developments regarding the International Monetary Fund’s synthetic reserve currency are unfolding rapidly.
Author of the Big Reset, Willem Middelkoop, reported this August a “Substitution Fund” is being discussed in the higher echelons of the monetary elites, to facilitate dollar exchange for SDRs outside the market, and thus creating an escape from dollar reserves without putting downward pressure on the dollar.
Also in August, The PBOC allowed a division of the World Bank (the IBRD) to issue bonds denominated in SDRs in the Chinese market. The bonds worth $2.79 billion dollars can be created “soon” – presumably within a month. In addition,the Chinese government-linked China Development Bank will issue SDR notes worth somewhere in between $300 million to $800 million dollars. Both issues are “SDR-denominated financial market instruments” called M-SDRs by the IMF. Though experts think the M-SDRs will encounter many practical challenges when implemented and demand will be tepid, nevertheless the intention by the PBOC to launch these instruments is clear.
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