http://www.wantchinatimes.com/news-subclass-c...000004&c...
China has the ability to crash the unstable US dollar with 30,000 tons of
gold reserves, says Chinese economic observer Jin Zihou.
In a commentary posted online, Jin noted that former US Federal Reserve
chair Alan Greenspan once said that the renminbi could become unexpectedly
powerful in today's financial system if Beijing would convert its US$4
trillion in foreign reserves into gold.
With the US dollar growing more unstable and China being America's largest
creditor, Beijing could potentially crash the US dollar with 30,000 tons of
gold, Jin said.
The US dollar still accounts for 60 percent of global foreign reserves,
though there are many countries hoping to become less reliant on the dollar.
If China really wants to challenge America's place in the global trade and
finance markets, it will have to do so via a significant amount of gold, Jin
said.
Bloomberg estimates that since the last official announcement in April
2009, gold reserves held by China's central bank may have doubled to 3,510
tons. This would make China the second largest keeper of gold in the world
behind the United States' 8,133.5 tons.
However, Alasdair Macleod, head of research for GoldMoney, states that
China could have easily piled up 25,000 tons of gold between 1982 and 2003,
meaning its gold reserves could have exceeded 30,000 tons by now.
It is suspected that China could be preparing to release an update of its
gold reserves because the country's decision makers appear to be trying to
push the yuan into the International Monetary Fund's special drawing rights
basket along with the dollar, the euro, the Japanese yen, and the pound
sterling.
Beijing's attempts to internationalize the renminbi have been relatively
successful, as China already has signed currency swap agreements with around
28 countries and established a yuan trading center in Zurich, Switzerland.
China has also encouraged Hong Kong and London to develop into renminbi
offshore markets and pushed for the Shanghai Cooperation Organisation to
promote non-US-dollar trade settlements across Asian countries.
According to Duowei News, a US-based political news outlet, China is
clearly preparing to brace itself from the fall of the dollar by storing up
gold reserves. It is not the only one, with the IMF still holding 2,814 tons
of gold in reserves and Russia doubling its gold reserves since 2005.
If China really has 30,000 tons of gold, then the renminbi will be backed
by a powerful shield, Duowei said. Even if it doesn't, no one disputes that
China has been collecting gold on a large scale and that its influence and
position in global financial markets have grown significantly, Duowei added.
Citing estimates by the Organization for Economic Co-operation and
Development, Duowei says the Chinese economy is set to overtake the US by 2016.
This historical change could see the yuan replace the dollar as the world's
No. 1 reserve currency, Duowei said.
This is unlikely to happen overnight, Duowei warned, noting that China's
financial infrastructure is insufficiently developed and the likelihood that
China has nowhere near the 30,000 tons of gold suggested. China may now the
world's largest producer of gold with 440 tons per year and the Chinese
government may be buying a lot of gold around the world, but there is simply
not enough gold to go around given the high demand among Asian countries and
the fact that the rest of the world produces only 2,260 tons of gold a year,
Duowei added.
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