In a new move aimed at stabilizing the value of the yuan, two informed sources stated on Wednesday that the People's Bank of China has agreed to allow some commercial banks to purchase foreign currencies to cover the costs of gold imports, under recently increased quotas. The People's Bank of China sets the gold import quotas imposed by the country's major banks on the amount of bullion that enters China, the world's largest consumer of gold.
The People's Bank of China raised gold import quotas last month and allowed commercial banks to buy dollars to finance these imports. This decision follows a series of stimulus measures announced by the Chinese central bank on Wednesday, which includes interest rate cuts and increased liquidity in the financial system. These measures are part of Beijing's efforts to mitigate the economic impacts resulting from the ongoing trade war with the United States.
Beijing seeks through this step to limit the impact of the rising value of the yuan, which could put pressure on Chinese exporters who are struggling due to high American tariffs. The effects of these tariffs have begun to impact economic activities in China, as evidenced by the decline in new export orders in April.
It is worth mentioning that despite the sharp rise in gold prices recently, with the precious metal reaching an all-time high of $3500 an ounce last month, the People's Bank of China continued to increase its gold reserves for the sixth consecutive month in April, according to official data released on Wednesday.
These steps by the People's Bank of China indicate the country's strategy to bolster its gold reserves and ease the economic pressures arising from escalating trade tensions with the United States.
