Is China secretly expanding its gold reserves?

China has halted the expansion of its gold reserves – at least that is what one might think when analyzing WGC statistics. According to official data, Chinese vaults were last replenished in the fourth quarter of 2016. However, according to experts from Bloomberg, the information provided by the People's Bank of China is far from reality. Where do these suspicions come from?

1. It has long been known that China's long-term economic strategy—like Russia's—is to break the dollar's monopoly on the international trade market. One of the key elements of this plan is to accumulate enough gold reserves to protect the Middle Kingdom in the event of a sharp devaluation of the US currency.

2. The global situation should further encourage China to increase its gold reserves. This is due to both fear factors, such as the trade war with the US and the continuing tensions on the Korean Peninsula, as well as the relatively low price of gold.

3. A similar situation occurred several years ago. In the second half of 2009, the People's Bank of China stopped buying gold for six years without any explanation. When the silence was broken in 2015, it turned out that China had reserves of 1,658.4 tons, which was more than 57% higher than before.

4. In 2015, President Xi Jinping launched the "Made in China 2025" program, which envisions that by 2025, China will experience a technological leap in the pharmaceutical and electronics industries, where the production process requires the use of gold. To achieve this goal, China will have to provide domestic manufacturers with more and more of the yellow metal each year.

To support its argument, Bloomberg also cites the opinion of Philip Klapwijk, managing director at consulting agency Precious Metals Insights. Klapwijk believes that China's strategic goals strongly favor further purchases:

The strategic imperative is likely to be to continue adding gold quietly and gradually.

In addition to Klapwijk, the portal also quotes Keith Neumeyer, CEO of First Mining Gold, a Vancouver-based development company:

The reason why (China – author's note) should hold gold as a portfolio diversification factor has become even more compelling since relations with the US have become strained.

Neumeyer emphasizes that one of China's priorities is to become independent from the dollar before other countries are simply forced to do so. In his opinion, the world cannot sink deeper and deeper into debt indefinitely, and after some time there will be a "total reset" in economic relations.

Based on: "China's Gold Mystery: Is Nation Slowly Increasing Reserves?", www.bloomberg.com and "Official gold reserves", www.gold.org