Due to its population of well over a billion people, how China conducts itself is of extreme interest to investors. When the country tells its people to invest in gold and silver, many around the world took note. A shift in the Asian giant's policy towards precious metals being owned by the people is certainly something many investors are going to think about because the buying power is certainly nothing to sneeze at. In a recent column on GoldSeek, it was noted that the government of China has been systematically buying gold as a way to stabilize itself against the kind of fluctuations that are so common in holdings of currencies like the Japanese yen or the U.S. dollar.
Indeed, this is not a philosophy unique to China by any means because buying gold has historically been seen as a smart way to shore up against the kind of economic downturn that is headed not just to China, but to most of the world, according to widespread reports in the media. The looming financial crisis in Europe and the so-called 'fiscal cliff' in the United States are driving many to invest in gold as they brace for what comes next. First, say most outlets reporting on the issue today will become inflation tied to the printing of more paper money not backed by precious metals. Next, will come collapses across many markets, if analysts are to be believed.
Currently, the Chinese are facing real trouble as their production fails to meet the level of demand their population's size warrants. They look overseas for many things and that leaves them needing a way to control inflation, something that hard assets like precious metals can help them do. By having large stores of gold and silver they may have more buying power as various currencies weaken which would allow them to meet the demands they have.
Experts say that China is being smart by encouraging its people to buy gold, silver, and other precious metal investments because this means that the nation's supply will build up a bit more slowly than if the government purchased stockpiles all at once. A nation with the buying power of China making a grab at the world's gold supply would surely send gold prices skyrocketing and end up being counterproductive for the world's most populous nation. Instead, encouraging a more gradual intake ends up being a strategically wise thing to do.
It should also be said that China is currently undergoing a period of transition as those in power are experiencing a change in their leadership. Because China is both a communist nation and a global economic superpower, this is an uncertain time for the country and there is some risk of social, political or economic upheaval due to that uncertainty. Only time will tell how severe or not this might be; many are keeping their eyes glued to the Far East to see how things play out as well as what effects these upcoming changes might end up having on the world's economy as a whole.
While not many countries feel they do things in a similar way to China, it is interesting to note that their investment strategies are not so different.