China: Control the gold

I was reading idly the Annual report on exchange arrangements and exchange restrictions and discovered an interesting little fact about the Chinese monetary system:

By law, all gold produced in China is sold to the PBOC, which in turn sells it on to those wishing to use the gold jewelry, industrial or other purposes. Since most currency in China (like elsewhere) is paper money, the original purpose of the law (to ensure supply of precious metal for coin) is forgotten and this must just be a nice way of taking a cut for the Bank.

It sort of makes sense too in that it forces Chinese mainlanders to settle in RMB. If inflation becomes a bigger problem for people, they will not be happy with that but the government at least keeps control (esp as the standing committee runs the PBOC). Contrast that with what is happening Vietnam as the Dong inflation is driving people to settle debts in gold and other metals.

No doubt there will be other random posts on China shortly...