Why is China continuously increasing its gold reserves and what does this reveal about the future global economy?

 

Why is China continuously increasing its gold reserves and what does this reveal about the future global economy?

 

For the first time in nearly three decades, the total value of gold reserves held by global central banks has exceeded the value of US Treasury bonds. In 2025, the value of gold reserves reached nearly $4 trillion, while the value of US Treasury bonds was $3.5 trillion.

In 2025, gold surpassed the euro (currency) to become the second largest global asset after the US dollar.

This major change at the global level began when the US froze Russian assets in 2022 in the context of the Ukraine war, after which central banks around the world started buying gold on a large scale.

Central banks of various countries have bought more than 1,000 tons of gold annually for the past three consecutive years and by September 2025, despite extremely high gold prices, another 634 tons of gold were added to reserves.

According to Chinese experts, increasing gold reserves helps central banks reduce their dependence on the dollar and control dollar-related risks. According to these experts, high gold reserves support overall financial stability in the context of the weakening credibility of the dollar.

According to the data, as of September 2025, China's gold reserves accounted for 7.6% of its total international reserves, Russia's 41.3%, and India's 13.57%.

Analysts say that due to the uncertain economic situation and geopolitical tensions, the world's central banks are gradually reducing their dependence on the dollar and increasing their gold reserves, which can further diversify the global financial system.

During Russia's presidency of the BRICS in 2024, the 'Rix Cross-Border Payment Initiative' was proposed, which aimed to facilitate trade in their national currencies and reduce dependence on the dollar for BRICS member countries.

China is increasingly trying to trade commodities in yuan

Leading beyond the BRICS, China is continuously modernizing its financial infrastructure to expand the cross-border use of the renminbi. One major development in China is ‘Mbridge’, a blockchain-based central bank digital currency (CBDC) platform.

The project is being developed in collaboration with the central banks of Hong Kong, Thailand, the United Arab Emirates and Saudi Arabia and is expected to reach its initial operational phase (Minimum Viable Product) in mid-2024.

China’s gold reserves have further strengthened the perception of the renminbi’s stability and credibility. Since the launch of the renminbi international use program in 2009, the People’s Bank of China has concluded 32 bilateral currency swap agreements, worth a total of about 4.5 trillion yuan.

Half of these agreements are with Asian economies. Of these partners, 15 primarily trade commodities with China, while eight are part of a China-centric manufacturing supply chain.

The US dollar’s ​​dominance as the global reserve currency is facing growing challenges and countries are increasingly competing for global commodity supplies. In such a situation, China is increasingly trying to trade commodities in yuan.

China has also expanded its offshore renminbi infrastructure.

As of August 2025, the People’s Bank of China authorized 35 overseas renminbi clearing banks in 33 countries, covering most major trading partners. In 2024 alone, these clearing banks handled 937.6 trillion yuan in transactions, up 47.3 percent year-on-year, while cross-border renminbi receipts and payments reached 64.1 trillion yuan, up 23 percent year-on-year.

At the regional level, ASEAN and Europe recorded 8.9 trillion yuan in renminbi transactions with China in 2024. However, ASEAN’s growth rate was much higher, at 50.7 percent, while Europe’s was only 13.1 percent.

China’s cross-border interbank payment system, which was launched in 2015, processed a total of about 60 trillion yuan in transactions by the end of 2024.

Despite these achievements, the renminbi’s global role remains limited.

It accounted for only 2.06 percent of global foreign exchange reserves in 2024 and its share in global payments was only 2.94 percent as of November 2025. The international status of a currency is generally assessed by its use in trade, reserve status, pricing functions, and acceptance in investment and finance.

Although China's economic size and trade dominance provide a strong foundation, the renminbi still lags behind major international currencies in terms of financial market openness, depth, and policy predictability.

China's growing gold reserves have bolstered confidence in the renminbi and created more favorable conditions for its international status. However, capital account liberalization is ultimately necessary for it to achieve the status of a truly international currency.

As the world's second-largest economy, China is gradually moving toward financial openness, but its priority is to increase the use of the renminbi in trade transactions and cross-border payments, not to expand its share of global foreign exchange reserves. The latter step requires full capital account liberalization and full convertibility of the currency, which Beijing has avoided.