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China adds new glitter to its gold stockpiles

CHINA has raised its gold reserves by 76 percent since 2003, the chief currency regulator said yesterday.

In a related development, the country managed to make an 8 percent profit last year on its US$1.95 trillion in forex holdings under the principle of "safe diversification," the regulator added.

The country has added 454 tons to its gold reserves since 2003 - bringing the total to 1,054 tons - through domestic purchases and refining scrap gold, Hu Xiaolian, head of the State Administration of Foreign Exchange, said yesterday.

The report was the first time that authorities disclosed they had added to the gold stockpile since 2003.

The regulator, however, did not say why it was only now divulging the figure or whether the nation was moving its foreign reserves from US-dollar assets into gold. If there is movement, the effect is not substantial, as the country's gold cache amounts to less than 2 percent of its total foreign reserves.

"The gold reserve increase doesn't come as a surprise with gold's safe haven status," said Wang Lixin, China manager of the World Gold Council. "Gold's strong momentum against the global downturn has outshined other assets and attracted attention from the official sector."

China is the fifth biggest gold reserve holder behind the United States, Germany, France and Italy. It was in ninth place previously.

The US had 8,133.5 tons of gold at the end of March, accounting for 78.9 percent of its total forex reserves, according to the World Gold Council.

China's gold holdings are worth US$31 billion at the current price of about US$910 an ounce.

"Safety is the priority in forex reserves, and diversification is an effective means to hit your target," said Hu, who is also the deputy governor of the People's Bank of China.

Premier Wen Jiabao said in March that China is concerned about the outlook for its US-denominated assets, or US Treasury bonds, and wants assurances about their safety.

China managed to achieve an overseas investment return of US$82.5 billion last year, with profits from foreign exchange reserves making a strong contribution, Hu said.

Meanwhile, China reported a surplus of US$426.1 billion in its current account, which includes goods and services, in 2008, an increase of 15 percent from the previous year, the SAFE said in a report on China's balance of payments for 2008. The surplus in the country's capital account, which reflects investment, was US$19 billion, down 74 percent.

China's foreign exchange reserves stood at US$1.946 trillion at the end of last year, up US$417.8 billion from the year before, SAFE said.


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