Tuesday, January 15th 02:36 PM IST

China sets up new unit to hike Gold share in foreign reserves

# China Foreign Exchange Trading System  # inter bank gold trade  # SAFE  

Analysts said the world's second largest economy needs to add to its gold reserves to ensure national economic and financial safety, promote yuan globalization and as a hedge against foreign- reserve risks.

BEIJING(BullionStreet): As part of it's attempt to increase share of gold in foreign exchange reserves, China have set up a new unit called Co-Financing office.

CHINA'S top currency regulator State Administration of Foreign Exchange, (SAFE) said the new office would supervise entrusted loans of country's foreign currency reserves that provide credit for Chinese businesses investing overseas.

The loans will be provided in line with market principles, the regulator said.

The administration said the entrusted loans to commercial banks are aimed at supporting Chinese companies' overseas expansion. The new business can widen the investment scope of foreign exchange reserves and secure the value of the holdings.

However, the regulator didn't reveal on it's plans to add gold reserves in line with Chinese government as it remained secretive about its gold diversification and buying and does not disclose gold purchases to the IMF.

Analysts said the world's second largest economy needs to add to its gold reserves to ensure national economic and financial safety, promote yuan globalization and as a hedge against foreign- reserve risks.

The People’s Bank of China is accumulating significant volumes of gold since 2009, they added.

China holds the world's largest foreign exchange reserves of $3.31 trillion at the end of last year.

About 70 percent of such assets held by the central bank are in the US dollar, while gold accounts for only 1.6 percent, according to the statistics released by the International Monetary Fund.

However,the massive stockpile of $3.31 trillion is now facing increasing risks of devaluation as the yuan becomes stronger against major foreign currencies.

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