Gold jewelry sold at a counter in the gold jewelry area of a large shopping mall in Xi’an, Shaanxi Province, China, on September 29, 2026.
Photo | Future Publishing | Getty Images
Hello, I’m Evelyn. I am writing to you from Beijing. Welcome to the latest edition of The China Connection. This is a snapshot of what I’ve seen and heard from local businesses.
The monthly gold purchases for nearly two years are just part of China’s plan to close the gap with the United States in precious metal holdings. How will it affect the RMB?
big story
China’s decades-long push to internationalize the renminbi has been fueled by the establishment of Hong Kong as a center for gold trading denominated in the Chinese currency.
“As these volumes increase, we will also see an increase in the volume of physical gold transactions denominated in renminbi rather than dollars,” said Charles Zhang, managing director and Greater China corporate ratings lead at S&P Global Ratings.
The Chinese yuan, also known as the renminbi, is part of international transactions in a global financial system dominated by the US dollar. Analysts I spoke to don’t expect a major shift in that dynamic anytime soon, but Beijing’s gold purchases and Hong Kong’s trading platform are just the latest steps to help expand global use of the renminbi.
“The challenge with the internationalization of the renminbi is that it’s a little difficult to find places where you can use it,” Zhang said. “Especially with gold, if buyers can convert the RMB they receive into gold, they have more spending channels.”
Hong Kong, one of the world’s largest stock exchanges, last month confirmed its efforts to develop a renminbi-denominated gold market.
In a major move last year, the Special Administrative Region of China linked its gold vault with a vault in Shanghai, allowing physical gold to be delivered to international organizations in Hong Kong in renminbi.
S&P’s Chan said Hong Kong plans to expand the storage capacity of its gold vaults linked with Shanghai from 150 tonnes to more than 2,000 tonnes over the next three years.
This is about the same size as China’s entire gold reserves, he added. “If Hong Kong can complete this deal, it will become the world’s largest gold trading center.”
us dollar challenge
The United States still has the world’s largest gold reserves at more than 8,100 tons, according to the World Gold Council’s second quarter statistics. China had about a third of that, over 2,300 tons.
“China’s 23-month streak of gold purchases strengthens the credibility of the renminbi’s internationalization push,” said Hao Chou, head of research and chief economist at Guotai Jun’an International (Hong Kong).
“By steadily increasing gold reserves, the Chinese government is strengthening the long-term underpinnings of its financial system and reducing its dependence on dollar-denominated reserve assets,” he said. “While gold alone will not determine the renminbi’s global role, it increases confidence in the renminbi and supports broader efforts to expand trade, investment, and access to official reserves.”
Xia Yingying, head of the precious metals and new energy research group at Hangzhou-based South China Futures, said gold accumulation by central banks in China and other countries would help reduce global dependence on U.S. Treasuries and U.S. dollar reserves. According to CNBC’s Chinese translation.
“This suppresses the dollar premium as a reserve currency and increases the risk premium associated with the dollar in terms of credit, fiscal policy and sanctions,” Xia said. “In the medium to long term, the US dollar’s monopoly position in the global foreign exchange reserve system will gradually weaken.”
But China’s increased gold purchases also come as U.S. Treasury Secretary Scott Bessent on Friday named gold standard supporter Judy Shelton as senior adviser for China.
The rise of Asian economies as manufacturing powerhouses benefited from the United States’ decision to abandon the gold standard more than 50 years ago. In 2021, central bank research group OMFIF wrote that “the de-linking of the dollar to gold and the resulting rise in oil prices have weakened the economics of Western manufacturing, sending capital to Asia in search of cheaper labor and lower overall costs.”
China is the largest consumer and producer of gold, but it is just one of many developing countries expanding its reserves from 2022 onwards, according to S&P. The World Gold Council showed that Poland has increased its gold reserves by more tons than China.
go to the source
This trend is not limited to financial transactions. As with rare earths, the Chinese government’s gold ambitions begin with control over some of the products.
China has acquired major gold mines across Latin America, Africa and Asia, according to S&P Global Ratings.
“China’s plans for gold and its activities are comprehensive and long-term. These trends will continue in the coming years,” Zhang said.
“This comprehensive nature is something that the market often misses,” he said.
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very soon
October 14: CPI, PPI. trade data
October 19: Third quarter GDP, retail sales, industrial production, fixed asset investment
October 19th to 22nd: Financial Street Forum in Beijing. Bund Summit in Shanghai
