The PBOC is not “China” but rather the central bank of China. While the PBOC may not have added much gold to its reserves in 2016, gold was still mined in China and imports of gold continued to flow into China via Hong Kong and Shanghai. This gold goes to individuals, state owned investment companies and banks and to satisfy demand on the Shanghai Gold Exchange. Gold demand in China as measured by withdrawals on the Shanghai Gold Exchange in 2016 wasdown 24% from 2015.
China only reports on gold held by its central bank, not gold held elsewhere in the country.
Chinese Foreign Reserves
Chinese foreign reserves fell $68 billion in November from $3.12 trillion in October to $3.052 trillion, the lowest level since 2011. Chinese foreign reserves fell another $42 billion in December 2016 to $3.01 trillion.
In January 2017, Chinese foreign reserves fell under $3 trillion for the first time in six years.
In February 2017, Chinese foreign reserves inched back above $3 trillion.
In March 2017, Chinese foreign reserves rose another $4 billion to $3.09 trillion.
In April 2017, Chinese foreign reserves rose another $20.45 billion in April to $3.29 trillion.
In May 2017, Chinese foreign reserves rose another $24 billion to $3.054 trillion.
In June 2017, Chinese foreign reserves rose another $3 billion to $3.057 trillion.
Just as the gold held on the PBOC’s balance sheet does not represent all of “China’s gold”, the foreign reserve assets on the PBOC balance sheet do not represent all of China’s assets.
Chinese Holdings of U.S. Treasuries
According to the most recent report by the U.S. Treasury Department on foreign holdings of U.S. Treasury securities, China held $1.087 trillion in U.S. Treasury bonds as of the end of April 2017.
China is no longer the world’s largest foreign holder of U.S. Treasury Securities.
Chinese holdings of U.S. Treasury Securities are on the rise.
I noted in the summer of 2015 and again in early 2016 (when most commentators were insisting the Fed could NEVER raise rates, or indeed would be lowering them) that the Fed WOULD raise of interest rates and continue to do so slowly to make US bonds cheaper and more attractive to foreign central banks. Early this year, I noted that Trump overtures (N. Korea/not labeling them a currency manipulator) might also result in renewed buying by the PBOC of US Treasuries.
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NB: PBOC gold reserves calculated from PBOC data that lists gold reserves by dollar amount at end of each month. Dollar amount is divided by the LBMA gold price, provided by Kitco, at the end of each month to get a troy ounce total which is then converted into metric tons.
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