Recent developments surrounding China’s gold reserves have sparked intrigue and speculation among analysts, pointing to discrepancies between reported and actual holdings. Following a brief market reaction to the People’s Bank of China (PBoC) halting gold purchases in May, analysts have scrutinized China’s gold inventory, suggesting significant undisclosed holdings.
Chen Long, founder and lead economist at Plenum and a respected commentator on China’s economy, highlighted discrepancies in the reported figures. Despite China’s significant gold imports exceeding 1,400 tons in 2023, coupled with domestic production of 375 tons, official disclosures from central and commercial banks only show a modest increase in gold reserves.
“The official numbers simply don’t add up,” Long affirmed in a recent analysis for ThinkChina. He pointed out that commercial banks reported holding about 1,016 tons of gold by the end of 2023, a figure that has been declining since 2016. Meanwhile, the combined total of reported gold reserves, including retail and central bank holdings, rose by only 431 tons last year—leaving a substantial gap of over 1,300 tons.
Long speculated on three plausible scenarios to account for the unexplained gold surplus. Firstly, he suggested that the PBoC might be withholding information about additional gold purchases to avoid market volatility, potentially doubling its stated reserves to approximately 5,000 tons.
“The central bank has a history of delaying disclosures,” Long noted, referencing a significant one-off increase of 621 tons in June 2015. Such actions suggest a precedent for non-disclosure to prevent market shocks.
Secondly, Long proposed the possibility that China’s sovereign wealth fund, the China Investment Corporation, could be holding some of the unreported gold as part of its diversified investment strategy. Unlike central bank disclosures, sovereign wealth funds are not obligated to reveal their gold holdings.
Lastly, Long hinted at discrepancies in reporting among Chinese commercial banks, suggesting possible overstatements of reductions in gold assets while actual household gold purchases may have been understated. This scenario implies a broader complexity in the gold market dynamics within China.
Despite these theories, Long acknowledged the inherent opacity in China’s financial reporting, implying that definitive answers regarding the missing gold may never come to light. Chris Powell, in a similar vein, underscored the unreliability of official gold reserve statements, reflecting broader skepticism in financial circles.
In conclusion, while the exact whereabouts of China’s unreported gold reserves remain uncertain, the discrepancy underscores the challenges in accurately assessing global gold supply and demand dynamics. Analysts and investors alike continue to monitor developments, cognizant of the potential implications for gold markets globally.
