China IMF Accounts Adjustment Could Lead To New Gold Reserve Announcement

China’s State Administration of Foreign Exchange has announced that the nation is to bring its Current Account reporting in line with International Monetary Fund standards.  This will mean that all its reserve assets, including its gold reserve, which is widely believed to be far greater than the 1,054.6 tonnes currently reported to the IMF, will fall under one accounting headline.  In the past, China has reported its reserve assets as a separate item, somewhat parallel to its reporting of its trade account and financial accounts, according to an article in the South China Morning Post.

Bringing its accounts into line with an IMF standard is seen as part of China’s desire to have the yuan included in a revised Special Drawing Right calculation, as the IMF is currently entering internal discussions with its members on a possible restructuring of the SDR – the results of which are due to be announced later this year, and come into force at the beginning of 2016.  This again is seen as part of a possible move in route to the yuan/renminbi being regarded as a global reserve currency

But, we wonder, could this provide the opportunity for China to restate its current gold reserve position (assuming it has indeed changed as most seem to assume) as an adjustment brought on by IMF reporting necessities.  It may be recalled that when China last restated its gold reserves six years ago it used accounts adjustments as a reason for the full number not having been reported to the IMF earlier.  At the time it said that the additional gold had been held in a separate account which did not need to be reported.  This time it could well use the requirement for meeting the IMF standards as a reason for substantially uprating its official gold reserve figure.  This as ammunition for its possible global currency realignment which may become necessary if it is to have the yuan admitted into the SDR basket of currencies.  We shall see.

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