China’s central bank, the People’s Bank of China (PBOC), has authorized several commercial banks to purchase foreign exchange to finance gold imports, following the recent increase in gold import quotas, according to sources with direct knowledge of the matter. The move is part of China’s strategy to manage the inflow of gold into the world’s largest consumer of the precious metal.
The PBOC sets annual gold import quotas for China’s major banks, which influence the amount of gold entering the country. These quotas have been adjusted in the past to balance demand for dollars. Last month, the PBOC raised the quotas, and now it has also permitted the banks to acquire foreign currency to fund these gold purchases.
This decision follows a series of economic stimulus measures announced by Chinese authorities, including interest rate cuts and a substantial liquidity injection, as the government seeks to mitigate the economic impact of the ongoing trade war with the United States. According to one source, the increase in gold import quotas may help banks manage the growing demand for gold while also slowing the pace of yuan appreciation.
The move comes at a time when gold prices have surged, driven by market volatility linked to U.S. President Donald Trump’s trade policies. The rally in gold has also pushed the yuan and other Asian currencies higher, as investors unwind carry trades and shift money from U.S. assets back to Asia.
The sources, who requested anonymity due to the sensitivity of the matter, confirmed the PBOC’s decision but noted that the bank had not responded to a Reuters request for comment.
The increase in gold imports could help prevent a sharp rise in the yuan, which could negatively affect exporters already facing challenges due to rising tariffs imposed by the U.S. on Chinese goods. Economic data has shown the impact of these trade tensions, with new export orders falling sharply in April.
Despite high gold prices, China’s central bank continued to increase its gold reserves for the sixth consecutive month in April, reflecting the country’s ongoing interest in diversifying its foreign exchange reserves and strengthening its financial position amid global uncertainty. Gold reached a record high of $3,500 per ounce last month, fueled by fears over the trade war and strong investment demand from China and other markets.
