Alan Greenspan, former chairman of the US Federal Reserve, said China is increasing its gold reserves in an attempt to surpass the United States as the holder of the most monetary gold in the world. However, the US economist also said the country will not be able to maintain its rapid economic development due to a lack of innovation.
In a recent article entitled Golden Rule-Why Beijing is Buying, Greenspan said gold remains attractive to the Chinese government as it retains a universal recognized value that the US dollar cannot replace. The government could usurp America’s position as the world’s largest gold holder by converting a fraction of its US$4 trillion foreign reserves into gold, a move that would boost the yuan’s value significantly. If the venture failed, only a modest portion of its interests would be lost, yet if successful gold prices would begin falling once China reached its target. However, few people are interested in returning to the days of gold replacing fiat money nor do they want floating exchange rates which may lead to foregin exchange volatility.
Full article: China wants to overtake US in gold reserves: Greenspan (Want China Times)