The People’s Bank of China (PBOC) has expanded gold import quotas for major commercial banks and granted them approval to purchase foreign exchange for bullion imports. According to insiders familiar with the development, this move aims to temper the yuan’s rapid appreciation and balance dollar demand.
The PBOC’s quotas govern the volume of gold entering China, the world’s largest gold consumer. Historically, the central bank has adjusted these quotas to modulate demand for the US dollar, impacting currency valuation and market liquidity. Sources reveal that the quotas were raised last month, with commercial banks now authorized to buy dollars for funding these gold imports.
This development coincides with a series of economic stimulus measures announced by Chinese authorities, including interest rate cuts and a substantial liquidity injection to cushion the economic impact of trade tensions with the United States. Allowing more gold imports could help lenders satisfy growing demand for the precious metal while simultaneously slowing the yuan’s ascent, according to one of the sources.
Gold Rally and Economic Strategy
The increase in gold imports comes amid a significant surge in gold prices, driven by global market volatility tied to US-China trade disputes. Gold, often viewed as a hedge against political and economic instability, hit a record high of $3,500 per ounce last month. The sharp rise was attributed to heightened investor demand and fears of prolonged tariff battles.
The stronger yuan, boosted by gold-backed capital inflows, has raised concerns for Chinese exporters already reeling from US-imposed tariffs. April’s economic data showed a downturn in new export orders, signaling the strain of trade barriers on manufacturing output. By loosening gold import restrictions, China aims to stabilize its currency and alleviate pressure on its export markets.
The PBOC has not commented on the quota adjustments. However, analysts predict that the measure is part of a broader strategy to reinforce China’s economic resilience amid ongoing global uncertainties.
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