China “wants to put gold back at the centre of the global payments system”, argues Charles Gave, chairman of investment research provider Gavekal. This is one of the driving forces behind its recent move to take control in Hong Kong.
Since 2005, the US has increasingly “weaponised” the dollar, using its position as the global reserve currency to exclude both nations and individuals from the global financial system. In response, China has steadily been building “a renminbi-based international payments system” based in Hong Kong and backed by its laws – thus the “new national security law” is partly driven by China’s goal of securing “national financial security”.
Sceptics argue “that the Chinese Communist Party will never open the country’s capital account” (allowing the free movement of renminbi around the globe). So, they claim, the idea that it will become an international currency and a challenger to the US dollar’s status remains remote. But there is a way around this – to make the renminbi exchangeable for gold, but “at a market price, rather than at a fixed price, as the US did after 1944”. After all, while “no one knows how much gold China owns,” it is the world’s biggest gold producer.
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