Gold reserves to reinforce confidence in yuan
Print Edition
The rise of gold as part of China’s international reserves and the central bank publishing yuan-denominated external debts are conducive to a stable yuan, analysts said yesterday.
Official data showed the country’s gold reserves hit 1,658 tons at the end of June, jumping nearly 60 percent compared with the figure last released by China’s central bank at the end of April 2009.
Although countries have long abandoned the gold standard as the basis of monetary systems, gold reserve volume remains an important factor in market assessment of a country’s currency value due to its price stability, according to analysts.
The central bank said the gold reserve increase was in line with the nation’s needs to keep adjusting the structure of its international reserves assets in order to ensure the assets’ security, liquidity and value increase.
“China’s gold reserves will strengthen yuan holders’ confidence, which will help stabilize the exchange rate and facilitate the internationalization of the yuan,” said Xu Mingqi, a researcher with the Shanghai Academy of Social Sciences.
“A more important role of gold reserves lies in risk prevention. It helps boost confidence in a country’s currency, and reflect the country’s economic and financial strength,” said Ding Zhijie, a professor at the University of International Business and Economics.
China is the world’s largest gold producer and a major gold consumer. The updated figure also revealed China surpassed Russia to become the fifth-largest holder of gold reserves around the world, behind the US, Germany, Italy and France.
Gold reserves account for a small part of China’s foreign exchange reserves, which hit US$3.69 trillion as of the end of June. The central bank said it would flexibly adjust its gold holdings according to its reserves and investment needs in the future.
The data came as China looks to advance its currency’s status as a key international reserve currency, which is now a prime candidate for the International Monetary Fund’s special drawing rights (SDR).
The international reserves data was released by using the special data dissemination standard (SDDS) established by the IMF in 1996 to enhance the availability of timely and comprehensive statistics, according to the People’s Bank of China, the country’s central bank.
By using the standard, the central bank has widened its external debt calculations by introducing yuan-denominated external debt for the first time, which stood at 4.94 trillion yuan, about 48.1 percent of China’s total foreign debt, central bank data showed.
“Improvement of the nation’s financial data disclosure, would better meet the IMF’s requirements on information disclosure, and have a positive impact on yuan’s inclusion into the SDR,” said Xiao Lisheng, a research associate at the Chinese Academy of Social Sciences.
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