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How Much Gold is in Chinese Vaults?

We know that the Chinese are the biggest producers and consumers of gold, but do we really know how much gold China really has? The short answer is no.

According to the Chinese Central banks, they have 1,842.6 tons of gold in reserve. That’s what is the official number is said to be. The People’s Bank of China has not announced an increase or decrease in their gold reserves since 2016 but it has been buying gold from other gold countries, so if there is an inflow of gold, but not an outflow of gold into China itself how can we even begin to guess the actual amount of gold in the Central banks. They can go for long periods without saying anything about their gold and then out of the blue reveal large amounts of gold in their holdings.

The People’s Bank of China stopped revealing its gold holdings and then for no apparent reason suddenly reported a 57% increase in its gold holdings in 2015. 16 months later, the bank announced additional gold amounting to 185 tons and then went silent. All the while, China has been pushing for its yuan to be included in the IMF’s basket of benchmark currencies.

A number of foreign central banks have been buying more gold. Cumulatively, the amount of gold bought by central banks is 148.4 tons. That was 22% higher than last year’s third quarter amount. The biggest buyers of gold are Russia, Turkey as well as Kazakhstan, even Hungary and Poland increased their own gold reserves. For a while it looked like China was sitting on the sidelines, but there are strong indications that they have also been increasing their gold stock. According to analysts, Chinese mines yielded about 450 tons of gold, which is about 15% of the global production. This means China is the largest producer of gold in the globe, however the is that the country is the largest producer of gold, but the government bars the sale of gold outside the country. So all that gold stays in China, but China still buys more gold from other countries.

China overtook India as the largest gold buyer in the world. The Chinese buy gold from London, Australia, Switzerland, Hong Kong and Singapore. Most of the gold is bought over the counter making it hard to track.

Where does all that gold go? Most of it probably ends up in the People’s Bank of China. But the Central bank cannot hold all that gold. A lot of the gold is held by private investors. Analysts put 55% of the gold coming into China going to the hands of private investors whilst the remaining 45% going into commercial banks and the Central Bank. There is speculation that most of the gold is held “off the books” in a mysterious entity known as The State Administration for Foreign Exchange (SAFE). There does seem to be a deliberate obfuscation of information about how much gold China consumes and where all this gold is held.

Why is China buying up and holding on to so much gold? It all comes down to the fact that the country with the most gold has the most power. Gold has value that is tangible and more quantifiable and reliable than fiat currency. Gold could be a way for China to challenge the US dollar hegemony and shift the balance of power. It’s an indirect way to challenge the US and challenge political dynamics. China isn’t the only country amassing gold, Russia has also increased its gold stock perhaps as a concerted effort towards economic independence from a dollar-based global economy.