This article just appeared in China's most prominent gold investment website:
Recently, China has been rushing to buy gold. China's central bank - PBOC - is adopting a series of measures to increase its gold holding, to make sure that gold will replace the position of dollars in its foreign reserve.
People in China's cities and rural area are buying gold jewelry, coin, and bullion; as an investment, this in unprecedented. The number of gold jewelry display rooms in mainland China is growing rapidly.
In the past few months, rumors about China will follow India to buy the remaining IMF gold have permeated the market. So when IMF said they would sell the remaining 191 tonnes of gold in the open market, some analysts predicted that China will stand up and buy. In the global gold market, China has been competing with India to become the largest gold consuming and importing country.
Even though China has been in a feverish mode buying gold recently, from the reserve perspective, China cannot compete with US at all. Gold reserve of US is the largest in the world, currently at approximately 8,133.5 tonnes.
But, is China capable of surpassing US? -- Even though China has repeatedly reiterated that within 10 years, it will increase the gold reserve holding to 10,000 tonnes. On the surface, it means China want to exceed US, but it's not an easy task. In fact for China, having a larger reserve than US is extremely difficult.
Gold Analyst Ji Zhang said, " Currently China's gold reserve is 1,054 tonnes, in the past 10 years, China increased its gold holding 550 tonnes, it's hard to imagine how China will be able to accumulate 10,000 tonnes of gold reserve"
Furthermore, he thinks, in order to have more gold reserve than US, China will need to increase gold holding by 800 tonnes each year. " this is an extremely difficulet work. Watching its current trend of accumulating gold, in the past 6 months, there has been no action. It's just talk -- big thunder, little raindrops".
China had a chance to buy IMF gold but dropped the ball, Zhang was deeply confused. " A year ago, IMF published the plan of selling 403 tonnes of gold, India bought 200 tonnes, they displayed great courage and excellant business wisdoms. China wanted to buy the gold cheaper, under $1,000 per ounce. But it's unlikely that China will reach agreement with IMF at this price level"
In the past 30 years, China has not been very active in increasing gold reserves. 1981, it had 395 tonnes, in 2001, it had 500.8 tonnes, and increased to 600 tonnes in 2002. In April 2009, China claimed its gold reserve increased to 1054 tonnes. Since then, it has been reported that Chinese government and PBOC has carefully drawn long term blueprint on how to increase gold reserve in the next ten years.
According to claims from China Gold Association, the gold purchase decision made by India was the real reason for China's decision on increasing gold reserve.
As dollar is depreciating, China is eager to increase its gold reserve.
Ji Xiaonan, the chairman of China central government's Administration of State Owned Major Enterprise, he stated in the next 3 to 5 years, China's gold reserve will reach 6,000 tonnes, in the next 8~10 years, it may reach 10,000 tonnes.
From Mr. Ji's view, in the next 10 years, China's gold reserve will definitely overtake US. but to achieve this goal, china must develop new major mines, greatly increase the mining activity, and buy great amount of gold from overseas.
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