How China's Gold-Buying Spree Could Help the Yuan Go Global
China has spent years trying to expand the international role of its currency, the yuan.
Now, gold is becoming a bigger part of that effort.
A recent CNBC report highlighted how China's growing gold reserves and Hong Kong's push to expand yuan-based gold trading could give businesses and institutions more reasons to hold and use the Chinese currency.
And gold is only one part of a much broader strategy.
China Keeps Building Its Gold Reserves
China's central bank has been steadily adding gold.
In August, the People's Bank of China purchased roughly 20 tonnes, its largest monthly addition since October 2023 and its 22nd consecutive month of reported buying. That lifted official holdings to about 2,387 tonnes, or roughly 9% of China's total reserves, based on the latest World Gold Council data.
China is also part of a much larger central-bank trend. The World Gold Council's latest buying report showed central banks added a net 39 tonnes in August, with China among the biggest buyers and Poland remaining one of the most aggressive accumulators this year.
For China, that gold can do more than simply diversify reserves.
A larger gold market tied directly to the yuan could also make the currency more useful internationally.
Turning Yuan Into Gold
That is where Hong Kong becomes important.
China is working to build out a gold market where more physical gold can be traded and settled directly in yuan rather than first moving through dollars. CNBC reported that Hong Kong's Shanghai-linked gold vault currently has a capacity of about 150 tonnes, with plans to expand that to more than 2,000 tonnes over the next three years.
The idea is fairly simple.
If a company or institution receives yuan through international trade, a deeper yuan-denominated gold market gives it another place to put that money.
Instead of converting yuan into dollars before buying gold, more transactions could happen directly in China's currency.
That makes the yuan more practical to hold, use and settle in.
Gold Is Only One Piece of the Strategy
China has also been building out the financial plumbing needed to make yuan-based trade easier.
One major piece is the Cross-Border Interbank Payment System, or CIPS, which handles cross-border yuan transactions. Annual transaction volume through CIPS more than tripled between 2020 and 2024, reaching about 175 trillion yuan, based on International Monetary Fund data.
That network is still expanding. In October, Ecobank announced plans to join CIPS, giving businesses across its African network another route for direct yuan settlement as China-Africa trade grows.
China has also expanded currency-swap agreements with foreign central banks, giving trading partners easier access to yuan without first needing dollars. The same IMF review also points to China's continued push into cross-border digital payments through the digital yuan.
Hong Kong is playing a role there too. A key offshore yuan funding program was increased from 200 billion yuan to 500 billion yuan this year, part of a broader effort to make the currency easier to borrow, invest, and use outside mainland China. The Bank for International Settlements has also highlighted these measures as part of the push to expand international use of the yuan.
Taken together, the strategy is pretty clear: make it easier to earn yuan, spend yuan, borrow yuan, invest yuan and now potentially move yuan directly into physical gold.
The Takeaway
A gradual shift away from the dollar would not mean the dollar suddenly loses its global role. But if demand for dollar assets weakens over time, that could further diminish the dollar's value and, in turn, the purchasing power of the money Americans hold.
And purchasing power is already under pressure from inflation. Even when annual inflation appears relatively modest, years of rising prices can compound, meaning the same dollar buys less and less over time. Additional pressure on the dollar could make protecting purchasing power an even more important consideration for savers and retirees.
Owning some physical gold can offer another way to diversify savings and potentially preserve purchasing power if the global financial system continues to become less dollar-dependent.
If countries around the world are actively looking for alternatives to dollar assets, it may be worth considering whether part of your own savings should be held in something different, too.
To learn more about owning physical gold or adding precious metals to a retirement account, call us at 855-271-2873 to speak with an experienced Lear Capital representative and explore your options.
