The Chinese government is taking many steps to prevent the outflow of dollars. In a recent move, China has curbed import of gold to strengthen the yuan. With the trade war heating up, the Chinese economy is facing a severe downturn. Tariffs are hurting China’s economy. The value of the yuan is seen to tumble too. China with its second-largest economy is bringing in many restrictions to protect its country from a dangerous slowdown. Shipments have been cut to protect the yuan. Gold imports are restricted.
China is the largest importer of gold in the world. In 2018, it has imported $60 billion worth of gold into its country, which is 1,500 tonnes of the yellow metal. This is equivalent to almost one-third of the total supply in the world, says China’s customs data. Official data reports that the Chinese government alone has increased its gold reserves almost fivefold, to around 2,000 tonnes of gold reserves. Import of gold has decreased to 575 tonnes in the first half of 2019, while it was 883 tonnes in 2018 for the same period.
Gold imports for the month of May 2019 were at 71 tonnes, while it was 157 in May 2018. June imports were at 57 tonnes in 2019, while it was 199 tonnes in June 2018. However, with no import quotas issued, banks in China have imported almost next to nothing in June and July 2019. China imports gold from Australia, Switzerland, and South Africa. Payment is made in dollars. Local banks and international banks import gold according to their import quotas given monthly by the central banks in China.
Analysts say that China is restricting gold imports to prevent the outward flow of the dollar from its country. This will help to curb the weakness in the yuan. Banks are further encouraging the inflow of dollars held overseas. Import invoicing is also restricted.
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