Tuesday, July 31, 2012 - 23:25

China Official Says Gold Reserves Should Be Increased

BEIJING (MNI) - China should increase its gold reserves as part of the broader strategy of encouraging the yuan's use in the international system, the head of the government's biggest gold producer said.

"Increasing gold reserves should be the core of our country's gold strategy for the purpose of ensuring economic safety and speeding up the process of yuan internationalization," said Sun Zhaoxue, general manager of China National Gold Group, in an article published by Qiushi, the Communist Party's leading magazine.

He noted that China's gold reserves account for less than 1.6% of the $3.3 trillion in total foreign exchange reserves.

Sun said gold reserves typically account for around 10% of a country's total foreign exchange reserves, and around 70% of U.S., French and Italian reserves.

He argued that U.S. gold reserves have helped support the dollar's position as a global currency, despite the international financial crisis.

Sun said domestic production should be the main channel for icnreasing reserves, but also recommended that the government buy on the international markets.

China increased its gold reserves to 1054 tons from 600 tons after the start of the 2008 crisis. The government has long fielded calls for the PBOC to increase gold reserves further, though central bank officials have warned of difficulties in doing so, noting the size of China's overall reserves and high gold prices. ** MNI Beijing Newsroom: 86-10-8532-5998 **

[TOPICS: M$Q$$$,MMQPB$,M$A$$$]

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