(Kitco News) - China’s plan to expand its influence over global financial markets and gold appears to be working, as several nations have shown interest in storing their gold with the Shanghai Gold Exchange (SGE) as it expands its vaults offshore.
According to a report from Bloomberg, Cambodia’s central bank is expected to be among the first countries to store part of its gold reserves in SGE vaults located in Shenzhen’s bonded zone. The report also noted that other unnamed central banks have expressed interest in storing their gold with China.
Cambodia’s central bank holds about 54 tons of gold, representing roughly 25% of its $26 billion in foreign exchange reserves, according to data from the World Gold Council.
Cambodia’s plan to relocate some of its gold holdings is not a major surprise, as China is a key economic ally. Through its Belt and Road Initiative, Chinese firms have helped finance and construct much of Cambodia’s infrastructure in recent years — from a new airport in the capital, Phnom Penh, to expressways and canals.
China holds roughly one-third of Cambodia’s debt, and trade between the two countries rose to a record $15 billion last year.
China has long been a dominant player in the gold market, and the People’s Bank of China has significantly increased its official gold reserves since late November 2022. However, the move to provide vault storage for other central banks marks a significant evolution in China’s reserve strategy.
But it’s not just China that’s buying. Emerging-market central banks have been major gold buyers as they diversify away from the U.S. dollar. Central banks have purchased roughly 1,000 tonnes of gold in each of the past three years. According to the World Gold Council, global gold reserves are expected to increase by between 750 and 900 tonnes this year.
While official demand has been robust over the past three years, most of the world’s gold remains stored in traditional market hubs such as London, New York, and Switzerland.
Analysts note that China is looking to capitalize on the growing trend of deglobalization as the U.S. increasingly weaponizes the dollar and its economy. At the same time, a growing number of nations have repatriated their gold to hold within their own borders.
China’s push to attract official gold reserves is just one component of its broader strategy to reshape the global gold market.
Earlier this year, it was revealed that the SGE plans to expand its network of offshore vaults in Hong Kong, helping raise the profile of its yuan-denominated precious metals products beyond mainland China.
