Sunday, May 12, 2013

China's Five Year Gold Plan

China  has a plan. And it includes a lot of gold. Below is a translation thanks to Google Translate. Its not a perfect translation but you'll get the point.

China clearly understands that nations with large gold reserves have an advantage in international markets with regard to the strength of their currencies, especially in times of financial crisis. They see the strength of both the dollar and the euro despite the recent poor monetary policies that their central banks are implementing. And as you'll see below, they note that despite the US' 8,000 tons of gold we keep printing (and diluting) dollars that are worth less and less, yet the dollar has not fallen as much against other currencies. To put it more succinctly, the US gets away with a lot of currency abuse as we print trillions more dollars because we hold so much gold, despite the fact that we are printing way more than we even can back with the gold we have. It gives us a special privilege. And now China wants that privilege too.

What follows is a translation of China's five year plan with regard to gold.

If you find the translation difficult to read at least note what I have bolded for emphasis. You'll get the idea. As you read it, think about the implications for the price of gold as they continue to accumulate over the next five years.
Build a strong China's economic and financial security barrier- Actively build and implementation of the national gold strategyPublished: 05 May 2013 at 10:48 | into the revival Forum | Source: "Seeking Truth" |
Throughout the world economic power, without exception, gold strategy is developed and implemented at the national level. China is the world's second largest economy, in a relatively short period of time quickly enhance the core competitiveness, an important aspect is that scientific construction of gold exploration, production, trade, consumption, and investment integration policy system, strengthen national strategy control over resources in the globalization process effectively safeguard national economic and financial security, and enhance the ability to resist external shocks that.First, from a strategic re-understanding the status and role of gold reservesThe late 1970s, after the collapse of the Bretton Woods system, the implementation of the collapse of the last century gold standard, gold widely questioned by the people under the influence of the dollar hegemony on economic and financial stability, "golden useless" began to spread around the world. Many people think that gold is no longer the monetary base, storage gold reserves will increase costs. So, some central banks began to sell gold reserves, gold remains in the doldrums. Affected by this point of view, of the world's largest gold producer, began the trend of slow growth in gold reserves.In fact, since the human discovery of gold, it because of its good stability and scarcity become an important means for people to exchange labor measure of value and wealth reserves. With the deepening global economic integration, as an important international reserve asset, gold in the stable socio-economic to protect against inflation, and improve the national credit, a stable exchange rate, but also has a special status of other financial assets can not be replaced. Especially the international financial crisis since the outbreak of the gold hedging against inflation is to highlight the growing wealth reserves strategic position to get the world's attention to that central banks began to net purchases of gold. Currently, there are more and more people realize that gold is useless "contains much of a lie, in fact, the United States has the world's official gold reserves of 74%, to suppress the other currencies in order to maintain a design by the dollar hegemony" smoke. " Tracing the source, the dollar and the pound sterling and later the euro was able to rise from a single national currency as the currency of the region or the world, because of the huge amount of gold reserves of these countries do support.Of particular note is that the huge deficits in the process of the international financial crisis, the United States, but it is not utilized gold reserves to reduce debt, but printing money, massive increase in the supply of dollars diminish the value, so that those to the U.S. dollar as the main reserve currency countries and regions rapidly shrinking wealth, so as to achieve the purpose of automatic debt reduction. The sharp depreciation of the U.S. dollar in stark contrast, the international price of gold continued to rise, the 2011 breakthrough 1900 U.S. dollars / ounce, gold assets should be preserved function and performance of the credit risk of depreciation of assets hedging function to be realized. The more natural, the dollar devaluation, the price of gold rose more hedging the more obvious huge gold reserves in the United States. Despite the hotbed of the international financial crisis in the United States, but the crisis but did not shake the U.S. dollar as the international currency status, the net wealth of the United States and not with the same degree of depreciation of the dollar decline, an important reason why the United States 8,133 tons of gold reserves in play a role. In the face of the global financial crisis in the world political and economic game, we again clearly see the gold reserves as a special important role in financial stability, national economic security "anchor".After 30 years of reform and development, China has become a highly open countries, not only with the world economy with hot and cold, and the changes in the world economic pattern plays an increasingly important role. Win international financial crisis brought new changes and new challenges, especially to effectively promote the process of internationalization of the RMB, China have huge economies of scale support, should also have to gold reserves as an important parameter that can not be ignored efforts to achieve a reasonable ratio of gold reserves and the total economy. This requires that we judged as soon as possible to build and implement the strategy of the scale of China's economic development for the National Gold gold reserves scale forward-looking.Second, increase efforts to integrate domestic resources is the main channel of China's increased gold reservesSince gold is a monetary nature, whether it is from the safeguard national economic security, or accelerate the process of internationalization of the RMB, the increase in gold reserves should be the core of one of the pillars of China's development strategy. International experience shows that most countries gold reserves accounted for 10% of foreign exchange reserves in order to safeguard financial stability at the same time to achieve high economic efficiency. At present, the proportion of foreign exchange reserves are at about 70% of the gold reserves of the United States, France, Italy and other countries. Since the beginning of the new century, China increase its gold reserves in 2001 and 2003, from 394 tons to 500 tons and 600 tons to 1,054 tons after the outbreak of the international financial crisis, but still gold reserves accounted for the proportion of foreign exchange reserves less than 1.6%, the gap with the developed countries.Of course, due to the large scale of China's foreign exchange reserves, the short term, like Europe and the United States gold reserves to become the main channel of foreign exchange reserves. Especially in the current international price of gold hit record highs, also increased the difficulty of the increase in gold reserves. Scenery long vision, we need to develop a a clearer national gold strategy, from the long-term interests, and make full use of the two markets, resources, and continue to become bigger and the size of the gold reserves, has gradually become a country's gold reserves commensurate with its economic strength . From the current conditions, in addition to choose the international market increasing reserves and gold, the main channel for the implementation of the national gold strategy should be to increase domestic gold resource integration efforts, and their rational use by increasing gold production to do a large scale of reserves, build a strong all-round the process of opening up the country's economic and financial breakwater. "The new century, under the guidance of the scientific concept of development, China's gold industry ushered in a period of accelerated development, in one fell swoop to get rid of the "gold-poor country" hat. From 2007 to 2011, China's gold production for five consecutive years, ranking first in the world, and established a complete gold industry system, strong support for the implementation of the strategy of the national gold. But sum up, China's gold industry, there are still many shortcomings, such as mines generally smaller scale, proven reserves, mining rights dispersed in the comprehensive utilization of resources, development order, environmental protection and other aspects of the uneven development of mineral enterprises The Scattered problem is particularly prominent. Statistics show that in 2011 China's gold mining counties and area of ​​more than 500, a total of more than 700 gold mines, the average yield per seat is only 0.5 tons. The world's largest gold producer Barrick Gold Corporation, Canada, in 2011, gold production amounted to 239.5 tons.View of this situation, in recent years, China has also continued to increase gold resources integration efforts. However, China has long been a lack of strategic planning, the development of gold resources and gold in recent years, "bull market" wealth illusion, a variety of social capital have been involved in the mining areas. To fundamentally solve these problems, we need countries to promote gold for the oil and energy are equally important strategic resource height from the whole industry chain to develop industry development planning and resource strategy. First to strict industry access from the technical, financial, safety and environmental protection to improve the access threshold for gold exploration and development of, from the source to improve the efficiency of development of gold resources; Second, to further improve the management of mining rights, and intensify the integration of resources, to further enlarge the stronger gold exploration and development of body, promote the concentration of resources to the advantage of enterprises to achieve economies of scale; Third, to encourage the backbone of the international competitiveness of enterprises to participate in international division of labor, to avoid loss of China's domestic industry concentration is low in the global should have the right to speak on the gold market.In addition, as an important component of the system of national gold reserves, China should also encourage individual investment demand for gold. Practice has proved that the civil gold reserves is an effective complement to national reserves for the maintenance of the national financial security is very important. World Gold Council statistics show that Chinese folk per capita is less than 5 grams of gold, compared to the global average of more than 20 grams gap significantly. This shows that China's gold civil reserve space and great potential.Third, is committed to a proactive in the implementation of the national gold strategyChina National Gold Group Corporation was established in early 2003, is China's largest gold production and sales enterprises, the only central enterprises in the gold industry. 10 years, under the guidance of scientific concept of development, China National Gold Group always adhere to the stronger and excellent enterprises to guard against financial risks, serve the overall interests of the country as a top priority, is committed to promoting China's gold industry from exploration, mining, processing, consumption, investment full the coordinated development of the industrial chain, and made due contributions to the healthy development of China's gold market and the effective implementation of the strategy of the national gold. In 2012, the total assets of China National Gold Group will exceed $ 60 billion, sales revenue will exceed 100 billion yuan. Currently, the Group has a daily ore processing capacity of 15 million tons of production capacity, business scope covers the entire gold industry chain, has grown into China's gold industry leader. In building a national gold strategy, we should effectively play a central corporate responsibility, and actively play a leading role in the gold industry efforts to build a stable development of the national economy an important support.Implementation of technological innovation, the gold promote industrial upgrading. "Twelve Five" period, we will target the cutting-edge technology of the gold industry, continue to increase investment in science and technology, technology-driven strategy, the gold promote industrial upgrading. At present, the China National Gold Group has three R & D projects selected for the "12th Five-Year" National Science and Technology Support Program, and by the Ministry of Science and Technology commissioned a large gold mining, processing green technology research and demonstration of the feasibility study on the project organization and management units. "Twelve Five" period, China National Gold Group should play a leading role in major research projects, through independent innovation and integrated innovation, efforts to solve the constraints gold exploration, mining, smelting and other fields of industry challenges, and continuously improve the comprehensive development and utilization of mineral resources capability. The same time, to the construction of key projects as an opportunity to continue to enhance the capability of independent innovation to the revitalization of the national equipment manufacturing industry as its mission, and explore mining companies and equipment manufacturing enterprises "win-win" model of cooperation, take the initiative to support the localization of major equipment, the promotion of mining equipment manufacturing .National commitment to the task, and increase the resources of the national gold reserves. "12th Five-Year" period, China National Gold Group to firmly grasp the lifeline of resources, exploration and reserve, merger integration, base construction, development of offshore gold resources, etc., to accelerate the national gold resource reserves. On the one hand, to take full advantage of their own research and talent advantages, the concentration of talent, capital and equipment to carry out prospecting Conference battle, fight for a shorter period of time to maximize the level of reserves of gold resources; On the other hand, should actively seek the support of the local government, the region to increase integration of resources, multi-point breakthrough, scientific development and efficient development, China's gold industry "small, scattered, partial, far" brought low resource utilization, environmental destruction and other issues resolved as soon as possible. Recently, the China National Gold Group planning in the country on the basis of 20 gold production base, accelerate the progress of the integration around the base of the small mines for the early completion of a number of state-of-the-art technology, energy saving and environmental protection, with an annual output of gold up to 3-8 tons Benchmarking Enterprise . At the same time, actively implement the "going out" strategy, the development of offshore resources, broaden the channels of China's gold resource reserves.Advocate "the gold to the people", and guide the healthy and sound development of. In recent years, the rapid development of China's gold market has created favorable conditions for gold to play a variety of functions, but also opened up a broad space for the industry to accelerate the development. China National Gold Group to seize the favorable opportunity, and vigorously promote the implementation of the "Golden People" strategy to expand the scale of supply at the same time, actively extend the industrial chain, increase the varieties of gold investment, encourage and guide people to rational investment, reasonable consumer. Current, important is to fully take advantage of nearly 1600 home of the country "China Gold" stores, broaden marketing channels, improve the marketing network, and strengthen brand promotion and other measures, to effectively achieve "the gold in China", "possession of wealth to the people," the gold strategy target.At present, the world economy is in turmoil and unstable factors still accumulated, uncertainty is still increasing. The face of the many new changes in the world economy, new challenges and new opportunities, from a strategic re-recognize the status and role of the gold as soon as possible to build and implement a national gold strategy, to enhance our ability to deal with complex situations. Only in this way, in order to promote the scientific development of China's gold industry, accelerate the realization of power to a power across gold from gold.(Author: China National Gold Group Corporation, general manager of the China Gold Association SUN Zhao Xue)

And just to give you an idea of where they are now, from Zerohedge:

as gold continued to decline in price in March, and long before its targeted smash in April, China was not backing off its gold purchases of the yellow product. Quite the contrary: as export data released by the Hong Kong Census and Statistics Department overnight showed, Chinese gold imports in March exploded to an all time record high of 223.5 tons. This follows 97.1 tons in February, and brings the total imports for the first quarter of 2013, or 372 tons, on par with what China imported in the entire first half. It also means that since January 2012, China has imported an absolutely stunning 1,206 tons of gold. Putting this number in context, this is 20% more than the entire reporter official gold holdings of 1054 tons, and represents roughly half of the total 2500 tons of gold mined every year (a number which is set to decline as gold miners find current prices unsustainable and are forced to shut down production).
Comparison of Chinese gold imports: 2012 vs 2013:

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