What’s Behind China’s Push for Dedollarization?
Gold Bullion
InternationalIndiaAfricaOleg BurunovWhile between September 2019 and October 2022, China’s gold reserves remained unchanged, November of last year saw Beijing push to bulk up on bullion. China is boosting its gold reserves for a fifth straight month because Beijing is preparing for possible future sanctions against the PRC, industry experts have told an international news outlet.Chinese scholar and finance author Sun Xiaoji said that China’s Central Bank is actively increasing its gold holdings as it hasn’t excluded a scenario where it is expelled from the global US dollar payment system.“Domestically, the Chinese Communist Party (CCP) advertises that it is ‘proactively challenging the United States and de-dollarizing,’ but the real reason is that it knows it will be sanctioned by the United States sooner or later. Therefore it is looking for an alternative to the US dollar, and the only alternative is gold,” Sun argued.The expert also commented on the current push for dedollarization by the BRICS group, of which China is a member. The group also includes Brazil, Russia, India, and South Africa.
Sun said the reason for dedollarization among the BRICS countries is not that China and Russia have decided to proactively scrap their use of the US dollar. He claimed the matter is that the recent wave of globalization has come to an end, and that the world is about to enter a stage of regional development or even inter-regional confrontation.
UK-based financial consultant Fang Qi, in turn, told the outlet that he believes China’s Central Bank has reduced its holdings of US bonds and increased Chinese gold reserves mainly out of concern for rates of return and reducing volatility.
The remarks come a few weeks after People’s Bank of China raised its golden reserves by about 18 tons, following the hiatus that was in place between September 2019 and October 2022. The country’s total stockpiles of bullions currently sit at about 2,068 tons, after growing by about 102 tons in the four months before March.
The developments followed China clinching a deal with Brazil late last month to trade in their own currencies, in a bid to abandon the US dollar as an intermediary.
AmericasWhite House Considers Restricting China’s Access to Dollars, Media Reports9 February, 15:18 GMTWestern media, in turn, reported at the time that the deal is expected “to enable China, the top rival to US economic hegemony, and Brazil, the biggest economy in Latin America, to conduct their massive trade and financial transactions directly, exchanging yuan for reals and vice versa instead of going through the dollar.”A recent survey report by the Central Bank of Brazil showed that as of the end of 2022, the proportion of the yuan in Brazil’s international exchange reserves had reached 5.37%, exceeding the proportion of the euro at 4.74%, which means that the yuan becomes the South American country’s second-largest reserve currency.
