Look Forward | Episode 41: China's Gold Chase In An Uncertain World

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Aries Poon: [00:00:00] Hello and welcome to the Look Forward podcast, powered by the S&P Global Institute, the platform for enterprise thought leadership across S&P Global. I'm Aries Poon. I'm leading the analysis team for Asia Pacific and Latin America in the market intelligence division, and I will be your host today.

Markets are moving faster, risks are shifting, and decision makers need foresight. In this podcast, we bring you expert perspectives from across S&P Global on the macroeconomic, market, energy,

and technology forces shaping what comes next and helping you navigate uncertainty and look forward with confidence.

Today, we're discussing gold in a context of how China sees a world becoming more uncertain, more fragmented, and potentially more volatile, and what that means for [00:01:00] policy, markets, and industry. A new S&P Global report argues that China's growing focus on gold is not simply a reaction to higher prices.

Instead, it reflects a broader effort to strengthen economic resilience, diversify risk, and reduce vulnerabilities in an increasingly unpredictable global environment. To unpack that story, I'm joined by Charles Chang, Greater China country lead for corporates at S&P Global Ratings. Charles, welcome.

Charles Chang: Thank you.

Aries Poon: So Charles, uh, first question, why is China suddenly so interested in gold, and what has changed?

Charles Chang: Yeah, thanks, Aries. This is, uh, the, the question that we tried to explore in this report. Uh, when we began the, the work on the report, uh, we found that, uh, there are a number of major developments, um, out of China on gold in the last few years.

Uh, for example, uh, we've seen, uh, PBOC's gold purchases have been [00:02:00] accelerating. Chinese consumers have been buying more gold. Chinese gold miners have been buying more gold mines overseas, and the deals are getting larger, and China reported a series of super giant gold discoveries. Um, and lastly, uh, China, through the Shanghai Gold Exchange, opened its first offshore gold vault, uh, that's designed to, uh, trade gold and renminbi in Hong Kong.

Um, outside of China, we also noticed that, uh, gold prices have been surging year after year in recent years. Uh, purchases of gold by central banks as well as consumers a- across, uh, developing world have, uh, also been surging. So we asked exactly this question, "Why are all these things happening at the same time?"

Uh, we noticed, uh, from, uh, our work that all of this began in twenty twenty-two, uh, and they have been accelerating since. So then the question becomes, what happened in twenty twenty-two? Um, the most, uh, significant event, uh, that we could find, uh, was the [00:03:00] escalation of the Russian-Ukraine war and the, uh, freezing of Russia's, uh, foreign exchange assets, um, you know, by the West, uh, in, uh, in that year.

And this, from what we can tell, is, uh, the trigger, uh, most likely trigger for all, all of these developments.

Aries Poon: So let's, uh, zoom in a little bit in the China's gold policy because your report actually traces a two-decade evolution of that. So why is that history important for understanding what is happening today?

Charles Chang: So in order to say that something has changed, uh, we need to first understand what things were like before, right? So, uh, from that perspective, we need to understand, uh, what China's policies were on gold, uh, in previous years. Um, and this is especially, uh, true on the policy side, uh, because if we are to call it a policy shift, uh, we need to understand, uh, what the previous policies were.

And lastly, we need to understand how China's [00:04:00] become the world's largest, uh, um, producer of gold and also the consumer of gold and why that has happened. Um, so this background, uh, uh, information is important to the research just so that we can understand what's happening, uh, you know, more clearly, uh, in recent years

Aries Poon: So if we zoom out and are we talking about China, which is increasingly sees gold as part of a broader resilience strategy rather than simply an investment strategy?

And how does that different from what we are seeing elsewhere?

Charles Chang: Well, what struck us, uh, and what really stood out to us, uh, in terms of China's strategy and how that differs from other countries, uh, is that first it's a national priority, um, and second, it's comprehensive in nature, from prospecting to production to purchases.

Uh, this is unlike, uh, what we know of gold policies from other countries. Um, as you say, if we zoom out and look at the bigger [00:05:00] picture, we see that China has, uh, expressed deep discomfort with, uh, geopolitical developments in the world since twenty twenty-two, and this has culminated to what President Xi recently called a world in disarray.

Uh, China's gold policies prior to twenty twenty-two, we're talking about policies before, those policies prior to twenty twenty-two focused on supporting gold production and prospecting, uh, on the production side, and on the consumption side, it focused on encouraging, uh, you know, savings in physical gold by Chinese consumers, what the government called stored gold, uh, among the people.

So, uh, aside from the gradual buildup of, uh, of gold reserves, these were the core, uh, of, uh, China's gold policies prior to twenty twenty-two. After twenty twenty-two, all of these things accelerated. We've seen the PBOC's gold purchases accelerate, not-- no longer a, uh, you know, a gradual exercise as [00:06:00] such. Uh, in, uh, twenty twenty-five, we saw this shift, uh, uh, you know, officialized, uh, in a gold action plan.

In the plan, gold was recognized as a sh- strategic mineral, that is what they call a cornerstone for China's financial and industrial security. Now, this is important wording, uh, from our read because, uh, as you may know, we have published a previous, uh, report in the China Lab, with your help actually, um, about, uh, China's dual mandate and how national security issues have risen to become, uh, the central organizing principle behind China's policies.

So in that light and in that context, this wording is important, uh, because to us, that means that, uh, gold has become a national priority for China, uh, and the, uh, all-out pursuit across the, uh, the supply chain for, uh, for gold from production to consumption, uh, is something that really does stand out, uh, for, uh, you know, for [00:07:00] China

Aries Poon: In fact, what's happening in China is kind of situated in a more broader context of the, you know, glo- uh, global gold chase, you know.

Um, because your report also saying that many developing countries have increased gold holdings too, right? Since twenty, uh, twenty-two. So what is driving this broader global trend?

Charles Chang: Yeah. So this is an important, uh, finding, uh, of the report because part of the reason, uh, we have looked across the developing world was because we wanted to first, uh, make sure that what we're saying, uh, is something that is not just happening in China, but is actually applicable to, um, other parts of the world.

Because China does get singled out on a lot of issues and, and tend to be a media focus, uh, because it tends to make good headlines. But the question is: Is China really the only ones doing this? Uh, and in this case, the answer is no. Uh, China is not the only ones doing this. Uh, we have seen since [00:08:00] twenty twenty-two, because of the, uh, uh, escalation in geopolitical risk, uh, that, uh, that we can identify, uh, that, uh, gold purchases by central banks, uh, across, uh, the developing world ha- have been accelerating, and purchases by consumers, uh, across the developing world, um, has, uh, you know, been accelerating, um, as well.

So Chinese gold consumers, uh, are buying more gold bars and coins, uh, and less gold jewelry because there's more demand for, uh, savings, uh, through gold, uh, rather than spending in luxury goods that are made of gold. The same thing is happening in India. So this is, uh, something that is happening across the developing world, um, and also, uh, for the central banks, uh, and consumers alike.

So this is something that, you know, we found to be much broader in scope, uh, than what the market and perhaps what the media often, um, uh, you know, uh, gives, uh, gives it context for [00:09:00]

Aries Poon: So if many countries are actually buying more gold too, as you mentioned, uh, is there anything that is making China's approach distinctive from other developing economies or they're basically very similar?

Charles Chang: Well, China's strategy is, is different just by the, uh, sheer fact that, uh, China occupies, uh, various important roles in the gold market. Um, in the global gold market, uh, and I'm talking about physical gold here, uh, China is the largest producer, as I mentioned, the largest consumer, uh, as I mentioned, and also the largest importer.

Um, so those three roles makes China, uh, the largest market for physical gold in the world. Uh, that position itself is, uh, uh, available only to China, and it is not, uh, the same for other countries. Um, and also, uh, China can trade gold in its own currency, which, uh, most other countries, uh, cannot, although some may [00:10:00] be looking into that.

Uh, but gold has not been an area where, um, uh, some of the countries that want to internationalize their currency, uh, have been focusing on. Uh, but China has been pushing this. And, um, also there is a, uh, degree of, uh, uh, you know, synergy between China's other major policies and its policies in gold. So for example, internationalization of the renminbi, uh, itself is also in part, um, you know, supported by, uh, a more, uh, gold trading in, uh, in renminbi.

So this major, uh, uh, objective, uh, of the government to broaden the use of its currency, um, also, uh, you know, cross paths and also, uh, is supported by its policies in gold. So that synergy and that, uh, cross support, uh, is something that we don't really see in other countries

Aries Poon: Thanks, Charles. I think that's very clear.

And, um, I actually want to, uh, bring up another idea from, from [00:11:00] your report, which is very interesting. It, it is about the Gold Road and the emerging network of gold vaults and trading infrastructure. So can you explain to our audience what exactly is China trying to build? And you actually also allude to the renminbi.

So to what extent this, uh, is actually about the dollar?

Charles Chang: Yeah. So this is, this is an interesting, uh, uh, uh, initiative. Uh, it began in twenty nineteen, uh, what was called the Gold Road. Um, in English, uh, this is sometimes, uh, translated, uh, as the Gold Corridor, but they're basically, uh, it seems like, uh, to us that they're, they're kind of falling into the same effort.

Uh, the core of the effort is to, uh, trade, uh, gold in renminbi. There were internationalization efforts, uh, by the Shanghai Gold Exchange, uh, years earlier, uh, when, uh, they launched the Shanghai Gold benchmark price, basically to allow for a global benchmark, [00:12:00] uh, denominated in renminbi. So even back then, there was the thinking and the policy drive, uh, to trade more gold in renminbi In terms of how that, uh, um, affects, uh, renminbi internationalization, well, the renminbi internationalization has progressed very slowly, uh, as everybody knows.

Uh, that effort has been in place for, uh, over a decade, but the progress is limited. Uh, but if you look at the overall change, uh, it has gone from the low single digits to the high single digits, um, you know, in global trade, which is, you know, from a relative basis, uh, you know, a meaningful change. So the, I think, issue, the issue with, uh, how this is- this is portrayed often in markets is that the talk very quickly goes into whether the renminbi is going to replace the dollar, whether trading of gold in renminbi is gonna replace the, the trading of gold, uh, in US dollars.

That's not the question, and that's not what the [00:13:00] government is looking for. The government is simply plugging away at trading more of gold, uh, in its own currency year after year, decade after decade. Um, this is something that they have shown, uh, to be their, uh, one of their core, uh, policy intents, uh, for the renminbi, and we expect that to apply to, uh, to gold as well.

Um, so in terms of the Gold Road, how that supports that, well, if you have a policy effort to broaden, uh, the use of renminbi in gold trading, uh, you will see, uh, more channels, uh, of, um, uh, of gold being converted to renminbi and vice versa. And that major push seems to have, um, had a real anchor, um, last year when, uh, the Shanghai Gold Exchange opened a gold vault, uh, in Hong Kong, and that gold vault, uh, is designed to trade renminbi, uh, in physical deli-- to trade gold, uh, in physical delivery, [00:14:00] uh, in renminbi.

So the physical delivery means that you can trade gold in renminbi and get the gold physically and vice versa. So that, uh, capacity initially in Hong Kong is about a hundred and fifty tons. Uh, Hong Kong plans to expand the, uh, city's, uh, vault capacity, uh, by over ten times, uh, to two thousand tons in three years.

Uh, that is a very rapid timescale. So when you have two thousand tons of gold, uh, if that vault gets filled up, uh, with that much physical gold, it necessarily makes you a major physical gold trading center, not just in APAC, but in the world. Um, and if, uh, that trading volume is, is all in renminbi, uh, then that, uh, would make it a big leap, uh, in terms of how much gold is, uh, traded in renminbi.

So that's, uh, all kind of in the future. Uh, in terms of whether that happens in three years' time or longer and whether this, uh, model that we see in Hong Kong [00:15:00] gets spread to other cities, we don't really know. Uh, the government is, is, uh, not very vocal about this. Uh, but, um, you know, we could see Hong Kong, um, as a kind of working prototype, if you will.

Um, if it really works in Hong Kong, it could, uh, you know, potentially be, um, you know, uh, expanded to, uh, to other major gold, uh, trading hubs like, uh, Singapore or, um, you know, uh, or in Malaysia, uh, or in Moscow. So, uh, we'll see

Aries Poon: Thanks. That's a very insightful deep dive into or behind the scene of China's, uh, gold policy.

So we're now in the last segment of this episode, which is we're looking at the winners, losers, and also industry implications. Um, first off, um, so what does this all mean for miners, investors, and the global gold industry?

Charles Chang: Well, for the global gold industry, um, I think the question is, uh, to what extent and when, uh, we will see more, uh, gold [00:16:00] supply come into the market.

Um, our teams believe that it will be a very long time, uh, just as a frame of reference. Um, as it stands right now, if you, uh, prospect and, and find gold deposits, from finding it to producing it, putting it out in the market, uh, that process takes, um, you know, eighteen years or more. So it's a very long time for that supply to come on.

Global gold miners have been expanding, uh, but really kind of, uh, around their existing assets. Uh, but those assets, uh, uh, most of the, uh, uh, kind of lower-hanging fruit and easier excavated areas are already, uh, you know, exploited. Uh, so their, uh, expansion of output from, uh, from those areas are gonna be limited.

Um, they are ex- uh, expanding, and they are, uh, uh, looking to, um, expand more, um, acquisitions. Uh, but their experience from the last gold price [00:17:00] downturn and also just by the industry's practice, uh, gives them, uh, quite a high level of prudence in terms of, uh, expansion. Uh, because gold miners globally don't really, uh, work to the gold, uh, cycle because of this very, very long, uh, project lead time that's required.

Chinese gold miners are a little bit different because they don't operate purely to, um, economic, uh, rationale and financial rationale. They also have, uh, national priorities that they adopt into their policy. And if you look at what the Chinese gold miners have said, uh, they have committed to expanding production, uh, to, uh, serve the country, uh, in, in various statements.

Um, and we have seen, uh, their acquisitions of gold mine assets a-around the world picking up, and the scale of those acquisitions, uh, are multiplying, uh, in scale. So what seems to be happening is that the Chinese gold miners are looking for what they can, can find as viable [00:18:00] assets, uh, and acquiring them to the extent they can.

They have shown Um, a, a decent track record of, uh, acquiring these assets and turning them around, uh, returning to profitability, and putting, uh, the gold production, uh, out to market quicker and closing the transactions faster, uh, than, uh, perhaps what the industry might expect. So they do seem to have that capability and that track record.

Uh, and would expect them to continue to leverage that, uh, in future acquisitions, uh, provided, uh, that, uh, as the industry, uh, has said, uh, that, um, they will, they will acquire with prudence. So it's not, uh, buy anything at any price. There's a good level of prudence. Uh, but to the extent that they can make it work and make it profitable, uh, we believe they will pursue that.

Um, and I think that posture is, uh, going to be more in place for the Chinese, uh, gold miners, uh, than perhaps for their peers globally. Um, and if [00:19:00] that, uh, continues to play out, we will see, uh, major Chinese gold miners continue to climb up the ranks of the, the largest gold miners in the world, um, as, uh, you know, Zhiji Mining have, uh, in the last few years.

Aries Poon: Thank you, Charles, for joining us today. The key message from the discussion is that China's interest in gold is about much more than rising prices, because what we're really seeing is the intersection of geopolitics, economic resilience, financial strategy, and industrial policy. And gold has become one way China is preparing for a world that it sees as more fragmented and less predictable, and that suggested story is likely to extend far beyond the bullion markets alone.

If you would like to learn more, please, uh, you can read our report, uh, China's Gold Chase to Gain Pace in an Uncertain World on spglobal.com, and you can also connect with our guest today on LinkedIn. Thank you so much for listening to the Look Forward podcast. [00:20:00] If you enjoyed this episode, please subscribe on Apple Podcasts, Spotify, or YouTube, and we'll see you next time.