December 29, 2009

China Seeks More Gold

A century ago China stubbornly stuck to a silver standard for its currency while the USA, British Empire, and Japan chose gold to back their currencies. The decision to stick with silver may have led to the rapid deterioration of China's preeminent position in trade, the collapse of the ancient Qing Dynasty, and the Chinese civil war. Earlier this year Beijing revealed that it quietly added to its gold reserves for years and that China had amassed over 1,000 tons giving it the world's 5th biggest gold stash. The faded great powers of Europe (Germany, France, and Italy) still have more but the USA is tops with nearly 9,000 tons in Fort Knox and Wall Street vaults.

Remarks by Ji Xiaonan, a senior mandarin at the Chinese State Council's State-Owned Assets Supervision & Administration bureau, reveal that Beijing may aim to displace the USA and own 10,000 tons of gold within less than a decade. Ji Xiaonan was quoted in the highly influential Economic Information Daily in late November. The newspaper dates back to 1981 and is often used to air visionary ideas on central government policy. Ji said that within only 3 to 5 years China could accumulate 6,000 tons of gold which would put Chinese reserves ahead of all nations but the USA.

Beijing's method of acquiring additional gold is not to buy directly on world markets but to mine it. The surprise increase in Chinese official gold reserves came from domestic purchases and Beijing is pushing for acquisitions of foreign gold mines. And so today in Canada mining stocks rose on news that Tongling Nonferrous Metals Group and China Railway Construction Corp. will take over Corriente Resources a Vancouver based mining conglomerate with interests in gold mining in Ecuador.....

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