Internationalization Of Renminbi Requires Increase In Gold Reserves
By GCRU Gold News on Wednesday, May 7 2014, 09:02 - Permalink
I present another intriguing translation, this time from an article by Tan Weihuan “China Gold News” Chief Researcher on the internationalization of the renminbi. What I find interesting is that according to the author China or any other of the BRICS countries in the short term are not interested in a gold backed currency (I share his opinion). There is a difference between backing and supporting a currency with gold. Backing means a fixed price, for example one gram of gold is one yuan. For China a gold backed renminbi is completely unrealistic at this point because the renminbi is still in it’s infancy – capital controls need to be lifted, full convertibility needs to implemented, etc. Next to the fact that the Chinese would have too little influence over the exchange rate of a gold backed renminbi should it be in full effect any time soon, which is nor desirable.
However, China has a great interest to support the renminbi with gold, having an x amount of tonnes at the PBOC, to give their currency trust and credibility. This is needed for the renminbi to be accepted worldwide. The euro and the dollar wouldn’t be reserve currencies if they weren’t supported by thousands of tonnes of Gold. It’s very clear the Chinese recognize the monetary value of gold and the purpose it serves in financial markets, but they take it one step at a time. For the years to come the schedule of the PBOC is to accumulate gold mainly for the internationalization of the renminbi (compete the US dollar) and to diversify and hedge their exorbitant US dollar reserves. At the same time the Chinese government is stimulating its people to hoard gold for wealth preservation