China’s Gold Reserves Updated: Surprised?

by Dan Popescu
10-Aug (24hrGold) — On July 17, 2015, China updated its official gold reserves as being 1,658.1 tonnes. This represents an increase since the last announcement in 2009 of just 604 tonnes (+57%). This amount is far lower than most expectations of between 2,000 and 4,000 tonnes, including mine. Surprised? Yes, I am. If we look at the amount of gold that has been brought into China, especially since the 2008 financial crisis, it is estimated China has accumulated approximately 14,753 tonnes. What we don’t know is how much is under government control and how much is in private hands.

Gold ownership in China was illegal until 2002. Since then it is estimated Chinese investors bought 1,530 tonnes of gold bars and coins. During the same period, Chinese consumers bought 5,282 tonnes of gold jewelry, according to the World Gold Council. That is approximately 6,800 tonnes of gold bought by Chinese individuals. It is also estimated that Chinese banks hold approximately 2,000 tonnes of gold (all Chinese banks are state/government owned).

The Chinese authorities have developed a range of policies going from legalizing gold bar and coin ownership in 2002 to opening its gold market via the Shanghai Gold Exchange in 2014. Could it be that most of the gold is in private hands and only a small portion of 1,658.1 tonnes out of 14,753 tonnes (only 11%) is in state ownership or government direct control? To me it is very improbable. Could all of a sudden the Chinese population increase its wealth in such a manner as to buy approximately 6,800 tonnes of gold? Chinese individuals had fist to use their income to better their life and income distribution in China is not widely spread but rather concentrated in the Eastern major cities.

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PG View: Impressive chart, that is likely more reflective of reality than 604 tonne addition to official gold reserves announced last month.