China Open Gold Trade in Yuan as Proxy for the Yuan

China keeps moving gradually to open up their economy to international forces. The People’s Republic of China has expanded the trade in gold in yuan and thus the internationalization of the national currency is moving closer. Gold merchants from the industrial metropolis of Shenzhen have been trading their yuan gold at the Hong Kong Stock Exchange since last week. Previously, this was only possible for Hong Kong gold traders. While some immediately claim this is China attacking the dollar, they are completely ignorant of international capital necessities.

This new connection between Shenzhen and Hong Kong follows the Hong Kong-Shanghai agreement reached in July 2015, which allowed Hong Kong dealers to trade gold in mainland China for the first time. Trading gold in yuan has one primary advantage. It is not going to unseat the dollar, it is all about trying to make the currency free-floating on the world market. Because gold can be traded in yuan, the common converter becomes gold between that and the dollar. It is NOT really a gold trade as much as it is an indirect means to trade the currency.

To unseat the dollar requires a place to PARK big money in yuan. That does not exist right now. That day is coming after 2031. This is another step in moving toward a free-floating yuan contract. Essentially, this is a formal proxy for a free-floating yuan and will replace the Bitcoin trading that has been used as the proxy to get money out of China.