In response to its ongoing dispute with the United States and to curb the outflow of US dollar, China has reportedly started to restrict its imports of Gold. The measure had reportedly started in May after trade negotiations with the United States had broken down. By restricting its imports of Gold, China is likely aiming to bolster its own currency as its economy braces for the impact of the geopolitical turmoil.
According to reports citing bullion industry sources close to the matter, China has cut its total shipments of gold by around 300 to 500 tons when compared to the previous year. That amount of gold is estimated to be worth between $15 billion to $25 billion based on current market prices.
Chinese customs data have revealed that China's importation of gold fell to 575 tons for the first half of the year compared to the 883 tons it imported over the same period last year.
For the month of May, China only imported 71 tons of gold, which was a drastic drop from the 157 tons it imported during the same month in 2018. Import data for June saw an even steeper decline, as China only imported 57 tons compared to the 199 tons for the same month last year.
The decision to curb gold imports as China's economy grinds to its slowest pace in nearly three decades, placing added pressure on its currency. China has historically been the largest importer of gold, with its imports in 2018 reaching nearly 1,500 tons or $60 billion worth of the precious metal. The amount of gold the country bought last year is roughly equal to one-third of the global bullion supply.
Apart from economic purposes, China's demand for gold is also due to the high demand for gold jewelry and investment bars. Over the last two decades, China had increased its purchase of gold, with the country's gold reserves rising to nearly 2,000 tons.
China mostly acquires its gold from countries such as Australia, South Africa, and Switzerland. The country pays for the gold in US dollar through local and international banks that are given import quotas by China's central bank, the People's Bank of China (PBOC).
According to bullion sources, the PBOC had started to curtail its granting of quotas. Some sources in the bullion trade have confirmed that China had even cut the issuance of import quotas for some companies since June. Although the country does still issue import quotas for specific cases such as for refineries that import semi-pure mined gold.