Gold jewelry sold at a counter in the gold jewelry area of a large shopping mall in Xi'an, Shaanxi Province, China on September 29, 2026.
Cfoto | Future Publishing | Getty Images
Hi, this is Evelyn, writing to you from Beijing. Welcome to the latest edition of The China Connection — a snapshot of what I'm seeing and hearing from local businesses.
Buying gold every month for nearly two years is just part of China's plan to narrow a gap with the U.S. on holdings of the precious metal. What does that do to the yuan?
The big story
China's decades-long push for yuan internationalization is getting a lift from the buildout of Hong Kong as a gold trading center — denominated in the Chinese currency.
"As those trading volumes grow, there would be a growing volume of the physical gold trade that is denominated in RMB and not linked in USD," said Charles Chang, managing director and Greater China country lead for corporate ratings at S&P Global Ratings.
The Chinese yuan, also known as the renminbi, accounts for a fraction of international transactions in a global financial system dominated by the U.S. dollar. Analysts I spoke with don't expect major changes to that dynamic anytime soon, but Beijing's gold purchases and Hong Kong trading platform are just the latest steps toward supporting greater use of the yuan globally.
"The challenge with internationalizing the RMB it's somewhat more challenging to find places where you can use the RMB," Chang said. "In terms of gold particularly, if the RMB that the buyer receives can be converted to gold, then it gives more channels for the spending to be done."
Hong Kong, home to one of the world's largest stock exchanges, last month confirmed its efforts to develop a yuan-denominated gold market.
In a major move last year, the special administrative region of China linked its gold vault with one in Shanghai, allowing physical gold delivery to international institutions in Hong Kong denominated in yuan.
Over the next three years, Hong Kong plans to expand the capacity of its Shanghai-linked gold vault from 150 tonnes to over 2,000 tonnes, S&P's Chang pointed out.
That's nearly as large as all the gold reserves in China, he added. "If Hong Kong is able to complete this transaction, then it would become of the largest gold trading centers in the world."
U.S. dollar challenge
The U.S. still has the largest gold reserves in the world at over 8,100 tonnes, according to World Gold Council figures for the second quarter. China held about one-third of that at over 2,300 tonnes.
"China's 23-month gold buying streak reinforces the credibility of the renminbi's internationalization drive," said Hao Zhou, head of research and chief economist at Guotai Junan International in Hong Kong.
"By steadily increasing gold reserves, Beijing is strengthening the long-term backing of its financial system and reducing reliance on dollar-denominated reserve assets," he said. "While gold alone will not determine the RMB's global role, it enhances confidence in the currency and supports broader efforts to expand its use in trade, investment and official reserves."
Gold accumulation by China and other countries' central banks will help reduce global reliance on U.S. Treasurys and U.S. dollar reserves, said Xia Yingying, head of the precious metals and new energy research group, at Hangzhou-based Nanhua Futures. That's according to a CNBC translation of the Chinese.
"This will suppress the U.S. dollar's premium from being a core reserve currency, and raise the risk premium associated with the dollar regarding credit, fiscal policy and sanctions," Xia said. "In the medium to-long-term it will gradually weaken the U.S. dollar's monopolistic position in the global reserve system."
China's growing gold purchases, however, also come as U.S. Treasury Secretary Scott Bessent on Friday named gold-standard supporter Judy Shelton as a senior advisor focused on China.
The Asian economy's rise as a manufacturing powerhouse benefited from the U.S. decision to abandon the gold standard more than 50 years ago. "With the delinking of the dollar and gold, and the consequent rise in the oil price, western manufacturing became less economic, and capital went to Asia in search of cheap labor and overall lower costs," wrote the central bank research group OMFIF in 2021.
While China is the largest consumer and producer of gold, it is just one of many developing economies that has expanded its reserves since 2022, according to S&P. The World Gold Council showed Poland has increased its gold reserves by more tonnes than China.
Going to the source
The trend goes beyond financial transactions. Like with rare earths, Beijing's gold ambitions start with control of some of the product.
China has acquired major gold mines across Latin America, Africa and Asia, according to S&P Global Ratings.
"China's plans for gold and its activities in gold are comprehensive and long lasting. These trends are going to be in place for a number of years," Chang said.
"The comprehensive nature of this," he said, "is something that markets often miss."
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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