Friday, June 18, 2010

PRC Official Says PRC Needs More Gold

It was only one member of the National People’s Congress, and what he said wasn't a ringing endorsement of gold, but it's significant in that it shows one high official of the PRC has endorsed moving some of that government's reserves from American T-bills and bonds. Essentially, Yin Zhongqing said that the PRC is underdiversified, and should buy more gold, oil and equities to diversify out of U.S. Treasuries:
[Mainland] China, owner of the world’s largest foreign currency reserves, should increase its holdings of precious metals and oil as part of a diversification strategy, a member of the National People’s Congress said.

The government should also cut overseas debt holdings and increase equity investments, Yin Zhongqing, vice chairman of the finance committee of the congress, said in Shanghai today at a conference. Foreign reserves, at $2.45 trillion as of end March, may reach $2.8 trillion by the end of the year and the country can’t afford to let the level rise higher, he said....

“China should adjust the asset structure of its foreign reserves and achieve the goals of making the investment safe, liquid, and preserving and adding value,” Yin said.

That last statement may rule out a big committment to gold, as the Foreign Exchange Commission said that gold is too illiquid and volatile to make a good investment for PRC reserves.

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