Center

Government quadruples gold reserves

(Shenzhen Daily)
Updated: 2006-05-11 14:25

Some Chinese economists are urging the government to quadruple its gold reserves to 2,500 tons from the current 600 tons because the country’s foreign exchange reserves had become the world’s largest, an official industry newspaper reported Tuesday.

“China should raise its gold reserves so those reserves can account for 3 percent to 5 percent of the foreign exchange reserves, instead of current 1.3 percent,” the China Gold quoted Liu Shanen, an expert at Beijing Gold Economy Development Research Center, as telling a conference.

He said the suggestion was made in light of the country’s economic strength and the size of its foreign trade.

China’s foreign exchange reserves rose to a record US$875.1 billion by the end of March on the back of a surge in its trade surplus and an increase in foreign direct investment.

“More gold reserves will help the government prevent risks and handle emergencies in case of future possible turbulence in the international political and economic situation,” the paper said, citing Tan Yaling, a researcher with the Bank of China.

A weak dollar had also made more gold holdings necessary, it quoted Liao Yingmin as saying. Liao is a researcher at the Development Research Center of the State Council, a government think tank.

China has been trying to gradually diversify its reserve holdings away from the dollar. But economists say fears of a collapse in the U.S. currency will prevent any dramatic shift.

Central bank official figures showed China’s gold reserves have remained unchanged since December 2002.

Gold prices have risen 32 percent this year due to tension in the Middle East, firm oil prices and a volatile dollar.