Originally posted onTuesday, March 05, 2013
“As gold is a currency in nature, no matter if it’s for state economic security or for the acceleration of renminbi internationalisation, increasing the gold reserve should be one of the key strategies of China.” — Sun Zhaoxue, CEO of China Gold, the largest gold mining company in China.
So wrote Sun Zhaoxue in the Qiushi Journal “the organ of the Central Committee of the Communist Party of China (CPC). It is the most influential and authoritative magazine devoted to policy-making and theoretical studies, with a circulation of 1.26 million.
Marx, of course, wrote in A Contribution to the Critique of Political Economy, Chapter 1, Part 1: “The truth of the proposition that, ‘although gold and silver are not by nature money, money is by nature gold and silver,” is shown by the fitness of the physical properties of these metals for the functions of money.”
Therefore, it is entirely consistent with the principles of “socialism with Chinese characteristics” for a ranking Chinese figure to observe that “gold is currency in nature,” and for such an observation to be given a venue in “the most influential and authoritative magazine devoted to policy-making” of the Central Committee of the Communist Party of China.
A very rough translation of Sun’s article, courtesy of Google Translate, indicates the People’s Republic of China to be sympathetic, and perhaps even forward leaning, on the matter of the gold standard:
Gold because of its inherent value, both the cornerstone of the national credit currency, the world’s strategic resources. Looking at the world economic powers, without exception, gold strategy was developed and implemented at the national level. China is the world’s second largest economy, in a relatively short period of time to quickly enhance the core competitiveness, an important aspect is that the science to build gold exploration, production, trade, consumption, and investment integration policy system, strengthen the state of this strategy control over resources effectively in the globalization process to maintain the country’s economic and financial security, and enhance the ability to resist external shocks.
A new understanding of the status and role of gold reserves, from a strategic height
The last century, after the disintegration of the Bretton Woods system in the 1970s, the implementation of the century collapse of the gold standard, gold dollar hegemony under the influence of the stabilizing effect of the economic and financial by people of widely questioned, “golden useless” began to spread around the world. Many people think that gold is no longer the monetary base, storage gold reserves will increase costs. So, in some countries the central bank began selling gold reserves, gold prices continued to slump. By this point of view, our world’s largest gold-producing countries began a trend of slow growth in gold reserves.
In fact, ever since mankind since the discovery of gold, it is because of their good stability and scarcity has become an important means for people to exchange labor measure of value and wealth reserve. With the deepening of the global economic integration, as an important international reserve asset, gold in stable social economy to protect against inflation, and improve the national credit, stabilize the exchange rate, but also with the special status of the other financial assets are irreplaceable. Especially since the outbreak of the international financial crisis, the gold hedge against inflation function to highlight the growing strategic position of its wealth reserves get the world’s attention again, central banks began to net purchases of gold. Currently, more and more people recognize that, “gold is useless contains too many lies, in fact, with over 74% of the official gold reserves of the United States to suppress the other currencies in order to maintain the the dollar hegemony design of a The “smoke”. Tracing the source, the U.S. dollar and the pound, and later the euro was able to be increased by a single national currency as the currency of the world or the region, because of the huge gold reserves of these countries do support.
In particular, it is worth noting that in the process of the international financial crisis, the United States appeared a huge budget deficit, but it is not utilized gold reserves to reduce debt, but printing money, a huge amount to increase the supply of dollars to the devaluation, so those The wealth of countries and regions of the U.S. dollar as the main reserve currency is shrinking fast, so as to achieve the purpose of automatic debt reduction. In stark contrast to the sharp depreciation of the U.S. dollar, the international price of gold continued to rise in 2011 exceeded 1,900 U.S. dollars / ounce, gold assets should be preserved function and its impact on the credit risk of depreciation of assets hedge function head. Natural, more devaluation of the dollar, the more the price of gold rose more obvious hedging role of America’s huge gold reserves. Hotbed of the international financial crisis in the United States, but the crisis failed to shake the status of the dollar as an international currency, the net wealth of the United States and not with the dollar and the same degree of decline, an important reason is that 8133 tons of gold reserves in the United States in play a role. In the face of the global financial crisis on the world political and economic game, we once again clearly see the gold reserves as a special important role in financial stability, national economic security “anchor”.
After 30 years of reform and development, China has become a highly open countries, not only with hot and cold with the world economy, and changes in the world economic structure plays an increasingly important role. Therefore, for the win after the international financial crisis has brought new changes and new challenges, in particular, effectively advancing the process of internationalization of the RMB, in addition to have large economies of scale support, the country should also have to gold reserves as the important parameters can not be ignored , efforts to achieve a reasonable proportion of the gold reserves of the total economy. This requires that we judged the prospective size of gold reserves, build and implementation of the national gold strategy appropriate to the scale of China’s economic development as soon as possible.
It is the main channel for China to increase its gold reserves to increase domestic resource integration efforts
Since gold (is) natural currency, either starting from the protection of national economic security, or to accelerate the process of internationalization of the RMB to increase its gold reserves should become the core of one of the pillars of China’s development strategy. International experience shows that the general national gold ownership accounted for 10% of foreign exchange reserves in order to safeguard financial stability at the same time to achieve high economic efficiency. Currently, the share of the gold reserves of the United States, France, Italy and other countries accounting for foreign exchange reserves are at about 70%. Since the beginning of the new century, China increase its gold reserves in 2001 and 2003, from 394 tons to 500 tons and 600 tons to 1,054 tons, after the outbreak of the international financial crisis, but still accounted for the proportion of foreign exchange reserves of gold reserves less than 1.6%, the gap with the developed countries.
(Author: General Manager of China National Gold Group, president of the China Gold Association)
That the most authoritative policy journal of China, “the world’s second largest economy,” is extolling gold as “a currency in nature” demonstrates how far the rehabilitation of the gold standard’s reputation has come in a very short time. As the FT pointedly observed on August 17, 2012, “Given the timing of the article and the standing of its author, its contents should not be taken lightly.”
“Qiushi Journal is derived from the four-character phrase shi shi qiu shi, which means “seeking truth from facts.” The magazine’s circulation now covers more than 100 countries and regions all over the world. By selecting and translating important articles from the Chinese edition of Qiushi Journal and its affiliated publication Red Flag Manuscript, and abstracts of theoretical articles from other important Chinese periodicals , the English edition of Qiushi Journal aims to promote the CPC and Chinese exchanges with foreign political parties and countries, and function as a platform for authoritative interpretations of the principles and strategies with which the CPC and the Chinese government run the country, as a top communication channel for publicizing China’s development theory, path and model and as an important window for political and academic circles and the people of foreign countries to learn about and study Chinese affairs.”
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