China’s Struggle To Make Yuan World Reserve Currency

China has made yet another move – this one the boldest of them all – towards eventually succeeding in making its currency strong enough to succeed the US dollar as the world’s preferred reserve currency.

You have to admire the Chinese for their tactics. Combining hard work, diplomacy, a low profile to the extent of secretiveness, and an ingenious strategy for their set targets. They have come a long way towards fulfilling their goals. But what exactly are their goals?

It is obvious that China has no imperialistic scope. It is already a huge country and geopolitical disputes have not been its concern for decades.

Chino-Russian gold fest

Being their aim is clear: they want to be the world’s leading economy. The Central Bank of the People’s Republic of China is buying huge quantities of gold and the yuan is getting stronger every year. Their improving relations with Russia indicates that they are honing in on overturning the US dollar on the worlds reserve currency.

With their agreement for the supply of natural gas, the Chinese are not only securing clean energy sources for their heavily polluted atmosphere, they are also killing two birds with one stone. The EU will certainly have to deal with Russia’s indifference towards sanctions coming from the West, as Moscow has found a thirstier and thus better customer for its fossil fuel products.

The Euro is a possible adversary to the throne of global reserve currency, though not a very strong one, and further weakening of European economies puts this currency out of the game for good.

The hardest blow, however, is cast on the Americans and the almighty dollar, as they are now losing battles in all fields, geopolitical, financial and most importantly, global influence and prestige.

Nevertheless, there is one crucial barrier the People’s Republic of China will have to tackle, and the Chinese know that all too well: the battle of gold reserves.China’s imminent anxiety to increase its gold reserves is the clearest sign of its intentions.

China’s gold reserves

China does not release any trade data on gold.The People’s Bank of China (PBOC) last disclosed its gold reserves in 2009, when it announced that its bullion holdings had risen to 1,054 tonnes from 600 tonnes in 2003.

The PBOC is believed to be adding to its gold reserves, according to the World Gold Council (WGC), as it looks to diversify from U.S. Treasuries. According to Reuters, China has begun allowing gold imports through its capital Beijing, in a move that would help keep purchases by the world’s top bullion buyer discreet; even a 1,000 tonne increase from last announced levels could prompt a jump in gold prices, which makes the PBOC very cautious about the timing of any announcement, at a time when it is trying to boost official reserves. Rumours on PBOC’s gold reserves range from 3,000 tonnes to 5,000 tonnes.

Given the dollar is showing signs of severe stress, a new world monetary system will be needed and the yuan is in the strongest position. In the meantime investing in gold is the most profitable solution for investors, so head over to today and bulk up on your own gold reserves.