China’s Golden Dream
Emergence of Chinese currency Yuan is directly interconnected with China’s ambitions to become leading global leader. To be in U.S.Dollar or European Union’s Euro league is ambition of Bank of China. The People’s Bank of China has given every indication that China wants the Yuan to be considered on level with the U.S. dollar and the euro. Where China is lagging behind is lesser gold reserve in comparison to both the U.S. and Europe has. So Chinese are in damage control mood. They are hell bent on buying the gold. If expanding the use of the Yuan was its goal then we can safely say that it’s their safe bet. Chinese Government has been piling up their gold bullion to back their currency Yuan. China’s currency is poised for a bigger role on the global stage as China’s economy continues to grow at breakneck pace
China is not only dependent on buying gold also they have taking other measures too. China is not only counting on their internal sources to pile up their gold stocks but also they are all come out to buy gold in world market. Of the roughly 2,800 tonnes of gold bullion supplied to the world in 2011 (source: World Gold Council), it is assumed that China is on the hunt for most of it, to back the Yuan. In 2009, China purchased four tonnes of gold bullion from Hong Kong. In 2011, China imported 46 tonnes of gold bullion from the small island nation. That’s an 11-fold increase!! Hong Kong has free economy with all the transparent stats. If Hong Kong is any indication of China’s desire to own gold bullion to back the Yuan, then the buying binge is extreme. China always used this clever tactics to surprise rest of the world.
In coming days China will sign an agreement with India, South Africa, Brazil, and Russia to offer Yuan-based loans in dealings with these countries, instead of U.S.-dollar-based loans. These countries have not raised any objection on this. For their international trade and cross-border lending, they will use the Yuan instead of the U.S. dollar. By 2015 China wants to raise the Yuan to 50% of all transactions from current 13% of all transactions. Apart from that China signed a loan agreement with Venezuela for $30.0 billion-the loan was transferred in Yuan instead of U.S. dollars.
We can come to on a conclusion by this: Experts don’t have an iota of a doubt that China will remain the biggest buyer of gold in coming days. Because China’s close rivals US and European Union have access reserve of gold to buy their respective currencies and China is lagging behind in this field. Secondly, it means that the Chinese economy and the Chinese companies will continue to be the future generators of growth going forward. One need only look to U.S. international companies and see what an international currency has meant for them in terms of expanding trade with countries worldwide and so providing great returns for their shareholders back home in the U.S.
It proves that China is not only a paper tiger. When time comes they can bite too. In spite of China not reporting how much gold bullion it has, China’s population and the People’s Bank of China will continue to be the largest source of demand in the gold bullion market.
It’s good for common investors who want to invest in gold. Gold investment has become goldmine anyway.