Gold jewelry sold on a counter in the gold jewelry area of a large shopping mall in Xi’an, Shaanxi province, China, Sept. 29, 2026. Photo | Future publications | Getty Images Hello, I’m Evelyn, writing to you from Beijing. Welcome to the latest edition of The China Connection: a snapshot of what I see and hear from local businesses. Buying gold every month for almost two years is just one part of China’s plan to close the gap with the United States in holdings of the precious metal. What effect does this have on the yuan? The big story China’s decades-long push to internationalize the yuan is getting a boost from Hong Kong’s construction as a trading center for gold, denominated in the Chinese currency. “As those trade volumes grow, there will be an increasing volume of physical gold trade denominated in RMB and not tied to US dollars,” said Charles Chang, managing director and corporate ratings leader for the Greater China country at S&P Global Ratings. The Chinese yuan, also known as the Renminbi, represents a fraction of international transactions in a global financial system dominated by the US dollar. Analysts I spoke to don’t expect major changes in that dynamic anytime soon, but Beijing’s gold purchases and Hong Kong’s trading platform are just the latest steps to support greater use of the yuan globally. “The challenge of internationalizing the RMB is somewhat more difficult than finding places where the RMB can be used,” Chang said. “In terms of gold in particular, if the RMB the buyer receives can be converted into gold, then there will be more channels for the spending to occur.” Hong Kong, home to one of the world’s largest stock exchanges, last month confirmed its efforts to develop a yuan-denominated gold market. In a major move last year, China’s special administrative region linked its gold vault with one in Shanghai, allowing the physical delivery of gold to international institutions in Hong Kong denominated in yuan. Over the next three years, Hong Kong plans to expand the capacity of its Shanghai-linked gold vault from 150 tons to more than 2,000 tons, S&P’s Chang noted. That’s almost as big as all the gold reserves in China, he added. “If Hong Kong can complete this transaction, it will become one of the largest gold trading centers in the world.” The US dollar challenge The United States still has the largest gold reserves in the world, at more than 8,100 tonnes, according to World Gold Council figures for the second quarter. China owned about a third of that figure, with more than 2,300 tons. “China’s 23-month gold buying streak reinforces the credibility of the renminbi’s internationalization drive,” said Hao Zhou, head of research and chief economist at Guotai Junan International in Hong Kong. “By steadily increasing gold reserves, Beijing is strengthening the long-term support of its financial system and reducing dependence on dollar-denominated reserve assets,” he said. “While gold alone will not determine the global role of the RMB, it enhances confidence in the currency and supports broader efforts to expand its use in trade, investment and official reserves.” Gold accumulation by China and other countries’ central banks will help reduce global dependence on U.S. Treasuries and U.S. dollar reserves, said Xia Yingying, head of the precious metals and new energy research group at Hangzhou-based Nanhua Futures. This is according to a translation from Chinese to CNBC. “This will eliminate the premium on the US dollar as a central reserve currency and increase the risk premium associated with the dollar in relation to credit, fiscal policy and sanctions,” Xia said. “In the medium to long term, this will gradually weaken the monopolistic position of the US dollar in the global reserve system.” However, China’s increasing gold purchases also come as US Treasury Secretary Scott Bessent on Friday named gold standard supporter Judy Shelton as a senior adviser focused on China. The rise of the Asian economy as a manufacturing power benefited from the US decision to abandon the gold standard more than 50 years ago. “With the decoupling of the dollar and gold, and the resulting rise in the price of oil, Western manufacturing became less economical and capital headed to Asia in search of cheap labor and lower overall costs,” central bank research group OMFIF wrote in 2021. While China is the largest consumer and producer of gold, it is just one of many developing economies that has expanded its reserves since 2022, according to S&P. The World Gold Council showed that Poland has increased its gold reserves by more tons than China. Going to the source The trend goes beyond financial transactions. As with rare earths, Beijing’s gold ambitions start with controlling some of the product. China has acquired major gold mines in Latin America, Africa and Asia, according to S&P Global Ratings. “China’s plans for gold and its activities in the gold sector are extensive and long-lasting. These trends will continue for several years,” Chang said. “The comprehensive nature of this,” he said, “is something that markets often overlook.” Need to know: DeepSeek considering doubling its latest funding round to $15 billion, sources say China’s DeepSeek is considering expanding its latest funding round to 100 billion yuan ($14.9 billion), double its previous target, with state-backed funds and corporate investors vying for stakes, people familiar with the matter told CNBC. AI startup Manus raises $500 million from IDG Capital and others, signaling investors are not deterred by Beijing’s unprecedented order to block Meta’s short-lived $2 billion acquisition. China and Europe agree to halve Chinese exports of hybrid vehicles European Trade Commissioner Maroš Sefčovič said on Friday that China has agreed to halve its exports of hybrid cars to the bloc. China’s auto market is on track for its worst year since 2021, with sales falling more than 20% in roughly the first three quarters of the year, according to data from the China Passenger Vehicle Association on Sept. 27. After a year-long slump, China’s property market may be poised for a turnaround. Residential real estate prices may bottom out in the third quarter of 2028, S&P Global Ratings said. He added that prices in China’s largest cities, such as Beijing and Shanghai, will likely recover next year. 14: CPI, PPI; commercial dataOct. 19: Third quarter GDP, retail sales, industrial production, fixed asset investmentOct. 19 – 22: Financial Street Forum in Beijing; Bund Summit in Shanghai
