Hi, this is Evelyn, writing to you from Beijing. Welcome to the latest edition of The China Connection — a snapshot of what I'm seeing and hearing from local businesses.
Buying gold every month for nearly two years is just part of China's plan to narrow a gap with the U.S. on holdings of the precious metal. What does that do to the yuan?
China's decades-long push for yuan internationalization is getting a lift from the buildout of Hong Kong as a gold trading center — denominated in the Chinese currency.
"As those trading volumes grow, there would be a growing volume of the physical gold trade that is denominated in RMB and not linked in USD," said Charles Chang, managing director and Greater China country lead for corporate ratings at S&P Global Ratings.
The Chinese yuan, also known as the renminbi, accounts for a fraction of international transactions in a global financial system dominated by the U.S. dollar. Analysts I spoke with don't expect major changes to that dynamic anytime soon, but Beijing's gold purchases and Hong Kong trading platform are just the latest steps toward supporting greater use of the yuan globally.