China’s Gold Rush: How Beijing’s Stacks of Yellow Metal Are Boosting the Yuan’s Global Ambitions

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China's strategic accumulation of gold, a continuous monthly buying spree for nearly two years, is more than just an effort to narrow the gap with U.S. gold holdings. It's a calculated move to elevate the yuan's international standing, particularly through the burgeoning gold trading hub in Hong Kong.

The Big Story: Gold as a Yuan Catalyst

Beijing's decades-long pursuit of yuan internationalization is finding new momentum through Hong Kong's development as a major gold trading center, specifically designed to support yuan-denominated transactions. Charles Chang, managing director and Greater China country lead for corporate ratings at S&P Global Ratings, highlights that as these trading volumes increase, a growing portion of physical gold trade will be denominated in renminbi (RMB) rather than the U.S. dollar.

While the Chinese yuan currently represents a small fraction of global transactions compared to the dominant U.S. dollar, analysts acknowledge that Beijing's gold purchases and Hong Kong's new trading platform are significant steps towards broader global yuan usage. Chang notes that if the RMB received by buyers can be converted to gold, it creates more avenues for the currency to be spent, addressing a key challenge in its internationalization.

Last month, Hong Kong solidified its plans to cultivate a yuan-denominated gold market. A pivotal move occurred last year when the special administrative region linked its gold vault with Shanghai's, enabling physical gold delivery to international institutions in Hong Kong in yuan. Over the next three years, Hong Kong aims to dramatically expand its Shanghai-linked gold vault capacity from 150 tonnes to over 2,000 tonnes – a volume nearly equivalent to China's entire existing gold reserves. If successful, this expansion would establish Hong Kong as one of the world's largest gold trading centers.

Challenging the U.S. Dollar's Dominance

Despite China's aggressive gold buying, the U.S. still maintains the world's largest gold reserves, exceeding 8,100 tonnes, while China holds over 2,300 tonnes. Hao Zhou, head of research and chief economist at Guotai Junan International in Hong Kong, states that China's 23-month gold buying streak enhances the credibility of the renminbi's internationalization strategy. He argues that by consistently increasing gold reserves, Beijing is bolstering the long-term backing of its financial system and lessening its reliance on dollar-denominated assets. While gold alone won't dictate the RMB's global role, it fosters confidence and supports broader efforts to expand its use in trade, investment, and official reserves.

Xia Yingying, head of the precious metals and new energy research group at Nanhua Futures, believes that gold accumulation by China and other central banks will reduce global dependence on U.S. Treasurys and dollar reserves. This, in turn, will suppress the U.S. dollar's premium as a core reserve currency and increase the risk premium associated with the dollar due to credit, fiscal policy, and sanctions. Xia predicts a gradual weakening of the U.S. dollar's monopolistic position in the global reserve system in the medium to long term.

Interestingly, China's increasing gold purchases coincide with U.S. Treasury Secretary Scott Bessent's recent appointment of Judy Shelton, a proponent of the gold standard, as a senior advisor focusing on China. It's noteworthy that China's rise as a manufacturing powerhouse benefited significantly from the U.S. abandoning the gold standard over 50 years ago. The subsequent delinking of the dollar and gold, along with rising oil prices, made Western manufacturing less competitive, channeling capital towards Asia in search of cheaper labor and lower costs. While China is a major player, it's not alone; many developing economies have expanded their gold reserves since 2022, with Poland, for instance, adding more tonnes than China.

Going to the Source: Controlling the Supply Chain

China's gold ambitions extend beyond mere financial transactions; they encompass control over the physical commodity itself. Similar to its strategy with rare earths, Beijing aims to control a significant portion of gold production. S&P Global Ratings reports that China has acquired major gold mines across Latin America, Africa, and Asia. Charles Chang emphasizes that China's plans and activities in gold are comprehensive, long-lasting, and will continue for years, a facet often overlooked by markets.

Need to Know

• DeepSeek's Funding Surge: China's AI startup DeepSeek is reportedly considering doubling its latest funding round to nearly $15 billion, driven by strong interest from state-backed and corporate investors. This comes as another AI startup, Manus, secured $500 million, indicating investor confidence despite regulatory actions against Meta's past acquisition attempts.
• China-Europe Hybrid Vehicle Deal: European Trade Commissioner Maroš Sefčovič announced that China has agreed to halve its hybrid car exports to the EU. This agreement follows a challenging year for China's auto market, which has seen sales decline by over 20% in the first three quarters of 2026.
• China's Real Estate Turnaround? S&P Global Ratings projects that China's residential real estate prices may bottom out in Q3 2028, with a potential recovery in major cities like Beijing and Shanghai as early as next year.

Coming Up

• Oct. 14: CPI, PPI; trade data
• Oct. 19: Q3 GDP, retail sales, industrial production, fixed-asset investment
• Oct. 19 - 22: Financial Street Forum in Beijing; Bund Summit in Shanghai