BEIJING, March 9 China should use some of its
$2.85 trillion foreign exchange reserves to buy more gold XAU=,
a government adviser was quoted as saying by local media reports
Li Yining, a senior economist at Peking University and member
of the Chinese People's Political Consultative Committee, an
advisory body to the national parliament, said that China should
use the precious metal to hedge against risks of foreign currency
"China should increase its gold reserves appropriately, and
China must take every chance to buy, especially when gold prices
fall," Li was quoted by the official Xinhua news agency as
His view that Beijing should diversify its foreign exchange
reserves, the world's largest, into commodities is nothing new.
Many other academics have publicly called on Beijing to do so.
But Li's views may carry more weight than most. Many of his
former students are now high-ranking officials, including Chinese
Vice Premier Li Keqiang, who is seen as Premier Wen Jiabao's
likely successor in 2013.
However, Yi Gang, head of the State Administration of Foreign
Exchange, which is responsible for managing most of the country's
foreign currency holdings, said recently that it was not possible
for China to make big purchases in the spot gold market.
"If China gets into these markets and pushes up prices to
extremely high levels, the Chinese people will bear the cost at
the end of the day as China is often the key buyer in these
markets," Yi said.
He added that Chinese firms and households had purchased more
than 300 tonnes of gold last year, and that it would have been
hard for the government to buy any more with foreign reserve
"The gold price shot up last year, and surging gold prices
have forced Chinese people to pay more as there is strong demand
for gold for those getting married and other events," he said.
According to the central bank, China's state gold
reserves have been held at 33.89 million ounces since April 2009.
Gold prices have risen about 10 percent in the last six
weeks, as clashes in Libya and turbulence across the Arab world
have encouraged investors to seek a safe haven, while oil has
gained about 17 percent in the same period, increasing gold's
inflation hedge appeal.
(Reporting by Zhou Xin and Simon Rabinovitch; Editing by