Advancing global de-dollarization, China’s central bank is boosting its gold reserves while signing currency swap deals in yuan with countries like Argentina, encouraging the use of renminbi instead of US dollars.
by Ben Norton
Part 2 - China’s central bank increases its gold reserves
In December 2022, the People’s Bank of China publicly disclosed for the first time in three years that it was increasing the share of gold in its foreign-exchange reserves.
Bloomberg noted at the time that “China’s purchases may be part of a plan to diversify its reserves away from the dollar“.
In January 2023, Bloomberg followed up indicating that the People’s Bank of China had again boosted its gold reserves.
The media outlet speculated that Russia is filling its reserves with gold as well.
China and Russia are not alone. Bloomberg reported that central banks around the world are buying gold, reaching a record of close to 400 tons in the third fiscal quarter of 2022, compared to 241 tons in the same period in 2018.
Bloomberg noted at the time that “China’s purchases may be part of a plan to diversify its reserves away from the dollar“.
In January 2023, Bloomberg followed up indicating that the People’s Bank of China had again boosted its gold reserves.
The media outlet speculated that Russia is filling its reserves with gold as well.
China and Russia are not alone. Bloomberg reported that central banks around the world are buying gold, reaching a record of close to 400 tons in the third fiscal quarter of 2022, compared to 241 tons in the same period in 2018.
Central banks in many countries are increasingly worried that they could be targeted by unilateral Western sanctions.
The United States and European Union have frozen or seized hundreds of billions of dollars and euros from the foreign reserves belonging to the central banks of Russia, Iran, Venezuela, and Afghanistan.
This has pushed many nations to look into diversifying their foreign reserves – not only governments targeted by the West for regime change, but even long-time allies such as Saudi Arabia, Egypt, and Türkiye.
The United States and European Union have frozen or seized hundreds of billions of dollars and euros from the foreign reserves belonging to the central banks of Russia, Iran, Venezuela, and Afghanistan.
This has pushed many nations to look into diversifying their foreign reserves – not only governments targeted by the West for regime change, but even long-time allies such as Saudi Arabia, Egypt, and Türkiye.
The Financial Times reported in June 2022 that central banks across the planet “are looking towards the renminbi to diversify their foreign currency holdings, in a sign that geopolitical flare-ups could chip away at the dollar’s dominance”.
A staggering 85% of central bank reserve managers have expressed interest in investing or already are invested in renminbi, the newspaper noted.
It quoted the head of strategy for global sovereign markets at top Swiss bank UBS, Massimiliano Castelli, who said: “We’re seeing a gradual erosion of the dollar… The picture that emerges is one of a multipolar currency system”.
The newspaper added, “Four-fifths of the central bankers surveyed said they believed that a move towards a multipolar world — away from a US-centric system — would benefit the renminbi”.
A staggering 85% of central bank reserve managers have expressed interest in investing or already are invested in renminbi, the newspaper noted.
It quoted the head of strategy for global sovereign markets at top Swiss bank UBS, Massimiliano Castelli, who said: “We’re seeing a gradual erosion of the dollar… The picture that emerges is one of a multipolar currency system”.
The newspaper added, “Four-fifths of the central bankers surveyed said they believed that a move towards a multipolar world — away from a US-centric system — would benefit the renminbi”.
The US-dominated International Monetary Fund (IMF) has made similar warnings. In March 2022, it published a research paper on the “stealth erosion of dollar dominance“.
The financial institution observed a marked rise in the use of “nontraditional currencies” in global central bank reserves. The Chinese yuan has driven this increase.
From 2000 to 2021, the percentage of foreign reserves held in US dollars dropped from a bit over 70% to just under 60%.
Thus far, the shift has been slow. But as the United States escalates its new cold war on China, the ensuing geopolitical conflict is likely to accelerate the move toward de-dollarization.
From 2000 to 2021, the percentage of foreign reserves held in US dollars dropped from a bit over 70% to just under 60%.
Thus far, the shift has been slow. But as the United States escalates its new cold war on China, the ensuing geopolitical conflict is likely to accelerate the move toward de-dollarization.
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