Thursday, 28th July 2005 (4064 views)

The head of the Dhangai Gold Exchange has reportedly called on China to increase it gold reserves.

Shen Xiangrong, chairman of the Shanghai Gold Exchange board, told Dow Jones Newswires that increasing reserves would lower the country's foreign exchange risk.

"I suggest that China should diversify its national reserves to different types of low-risk products such as gold and oil in the longer term," Mr Shen said.

Speaking after the revaluation of the yuan last week, the gold expert said that there was a growing risk of a drop in the value of China's foreign exchange reserves. The People's Bank of China dropped the yuan's valuation against the US dollar in favour of a managed float against an unspecified basket of currencies.

Mr Shen forecast that China's gold consumption would rise by 20 per cent to around 12.86 million troy ounces this year, as demand from jewellery makers and manufacturers flourishes. He added that the revaluation could also provide a major boost for gold trading and said he hoped that the gold exchange would be opened up to foreign investment within the next five years.

The Chinese central bank reports that the country's gold reserves were at 19.290 million troy ounces by the end of June, unchanged from the end of last year, while foreign exchange reserves rose to a record $711 billion over the half-year, up 16.6 per cent from the end of last year.

 

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