China has been increasing its gold bullion reserves while selling off US Treasury debt in the growing global trend towards de-dollarization and diversification of foreign exchange reserves. Since November 2022, China’s central bank has been accumulating gold reserves, with official figures showing an increase of 260,000 ounces in April 2023, bringing its total holdings to 66.76 million ounces.
The shift towards gold is not unique to China, as other countries have also embraced the precious metal as a safe haven and a reliable investment choice. In the first quarter of 2023, global central banks increased their gold holdings by a total of 228 tons, according to data from the World Gold Council.
China’s move to sell off US Treasury debt and increase its gold reserves is part of a broader effort to reduce dependence on the US dollar and switch to national means of payment in international settlements. The media has highlighted how many countries have become increasingly leery of relying on the greenback, as Washington has “abused” its hegemony. The US banking crisis earlier this year, along with the ongoing bitter standoff in Congress over the debt ceiling, and fears of a default with global repercussions, have all contributed to the urgency of shedding US government bonds.
The global trend towards de-dollarization is also paving the way for the boosted international standing of China’s own currency, the yuan. More countries are considering using national currencies for mutual settlements, with China already using mutual settlements in national currencies with over 30 countries. The yuan has become the world’s fifth-largest payment currency, third-largest currency in trade settlement, and fifth-largest reserve currency, according to official data cited by Chinese media outlets.
Similarly, some BRICS member states consider introducing a common currency. Brazil, Russia, India, China, and South Africa are set to meet for a summit on August 22 in Johannesburg, South Africa, to discuss reducing the share of the dollar in mutual payments. The possibility of a single currency emerging in BRICS is not being ruled out by officials and analysts.
While China’s move to sell off US Treasury debt and increase its gold reserves is noteworthy, the long-term impact of this strategy on global markets and the US economy remains to be seen. Only time will tell if this trend towards de-dollarization and diversification of foreign exchange reserves will continue and if other countries will follow suit.
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China #yuan #UnitedStates #dollar #dedollarization #gold #goldbullion #USTreasury
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