Following the slowdown in globalization and freezing of Russia’s reserves during the early 2020s, China decided to make gold a pillar of both its economic and defensive spending. This plan has been referred to as both Gold Road and Gold Corridor.

1 China`s gold strategy

The primary objective appears to be to reduce economic risks, via reserves placed in strategic locations (e.g. not within China, but with friendly nations). This newly placed gold reserve is supposed to increase usage of its currency, the Yuan, and improve relations. By asserting itself as a prime partner in gold, it also hopes to replace USD as the currency in which gold is traded, which would be a huge, psychological, win.

Placing a gold reserve in a different country is primarily a diplomatic tool: See how much I trust you? It can also be used to signify a change in the relationship, by removing the gold or threatening to do so. As actually removing the reserve, and publishing the act, would be a blow to the ego of that ally. Thereby giving China something they can use against the caretaker of the reserve.

2 Uses for the gold road

There is a knock on effect with other economic initiatives, by which they invest in infrastructure plus other things that seem of interest. The infrastructure itself is build to both spend its own excess production and to gain influence, via trade routes. Establishing a Gold Road, along this modern day Silk Road, would fully cement the relationship.

Placements appear to be focused around its already existing programs, so the end goal could be to simply reinforce relationships. Understandable, since storing highly valued, liquid, resources with unfamiliar parties seems rather risky.

Though, as the end goal is full Yuan trade, placing more gold vaults around the world is likely, since that would make it a lot easier for currencies to be bought and sold. Besides offering a possible collateral to nearby allies.

A future where large scale projects are accompanied by a gold reserve is possible, this would certainly increase the goal of a global network. Or potentially smaller reserves placed with non-strategic partners.

3 Roadmap

For several decades China was focused on producing goods, to expand its economy, the exact same route was taken for gold. As the internal wealth goal became pretty close to achieved, they allowed citizens to own gold once more in 2004. This was enabled by allowing banks to offer gold products to clients*. In the following years the internal market was expanded with small mines consolidating and a central trading platform built.

After becoming the biggest producer, in 2007, gold was officially included in its policies and foreign parties were allowed to also start trading, adding liquidity to the pool; after all, you can’t outproduce everyone and expect working class citizens to buy all that gold. Though by 2013 China was the biggest consumer of gold.

More infrastructure, some of it digitally such as a gold ETF, was built until in 2016 a global price for gold in Yuan was launched. Naturally this price has been pushed for since then and enforced whenever possible. The following year already saw a contract in Dubai, so there was almost immediate success.

The big turning point, towards the here discussed global goal was 2022**; Russia’s (an ally and also rather big and military potent country) foreign reserves were frozen, which is a rather annoying prospect for a country as focused on trade as China. So to reduce their reliance on foreign money and need for exchanges, a strategic plan to focus on gold was launched.

In 2025 the first offshore vault was enacted in Hong Kong***, signalling that the process of placing gold with partners has officially started.

In the future this policy could act as a negative factor for the gold price: That is because most miners and refiners in China are at least partially owner and/or controlled by the state, so they do not have the same price incentives as corporate parties. The negative effect is likely small, as turning a potential mining location into a full mine takes years and halting production is costly, so even listed companies are wary to stop production. This increased push for gold production is very likely to result in Chinese gold related companies to become some of the biggest in the world.

 

*Most western banks did offer gold to customers in the past, they stopped doing to because of high costs and the ability to trade gold on exchanges.

**Many other, developing, countries also increased their physical tonnage, where richer countries only saw increases based on price. So the friends of these freezing Russia’s funds saw no need to act, while other potential targets saw this as a sign that they needed to become less dependent on contemporary financial systems. The saved storage space if often rented to private individuals or sold to a third party who rents it to the exact same people.

*** There could be some debate about whether Hong Kong is considered a foreign country, since China does have control over Hong Kong: It is not possible for Hong Kong’s ruling body to go against China and expect zero backlash.