BEIJING, July 7 Following is a translation of a
statement on gold reserves by China's State Administration of
Foreign Exchange on Wednesday. [ID:nTOE66604R] [ID:nSGE6660CY]
Q: Is China planning to further increase its gold reserves?
A: Gold is globally recognised, is a store of value and can
be used for urgent payment. However, there are some limits to
investing in gold and it cannot become a main channel for
investing our foreign exchange reserves.
First, the size of the gold market is limited. Annual global
gold output is about 2,400 tonnes and there is a basic balance
between its supply and demand now. If we buy a large amount of
gold, it will surely push up the global gold price. China's gold
price basically matches the global level, so when Chinese people
go to buy gold jewellery in shopping centres, they face surging
prices. That will eventually hurt the interest of Chinese
Second, the gold price is very volatile. The global gold
price is much affected by currency rates, geopolitical changes,
supply-demand relations and speculation. It often fluctuates. In
addition, gold investment does not generate interest returns,
but investors have to bear warehouse, transportation and
insurance costs. Looking back at its performance over the past
30 years, the risk-return balance of gold is not very good. Gold
can help counter inflation, but quite a few other assets can
Finally, increasing the gold reserve will not help much in
diversifying China's foreign exchange reserves. In the past few
years, we increased the gold reserve by more than 400 tonnes.
Our country's gold reserve has already reached 1,054 tonnes.
Even if we double the amount, it can only diversify between $30
billion to $40 billion of the foreign exchange reserves, and the
proportion of gold reserve in our foreign exchange reserve will
only increase by one or two percentage points.
In conclusion, we will take careful consideration of our
demand and the market situation when reducing or increasing our
(Editing by Anthony Barker)