China is seeking to position itself as a custodian for foreign central bank gold, using the Shanghai Gold Exchange (SGE) as the platform to challenge the dollar’s primacy in the global financial system equiti reports. The initiative comes against a backdrop of record bullion purchases by central banks, heightened geopolitical risk and a recent surge in gold prices above $3,700 an ounce.

Shanghai

Beijing is urging central banks from friendly and non-aligned states to buy and store gold in warehouses linked to the SGE’s International Board, a platform created in 2014 to open China’s market to foreign participants under the supervision of the People’s Bank of China (PboC) equiti adds. According to the report, this focus is not on moving existing bullion away from traditional centres such as London, but on holding new purchases in China; a distinction is designed to lower resistance among policymakers concerned about disrupting long-established arrangements.

Since its creation in 2002, the SGE has grown into the world’s largest physical gold trading hub. In 2023 it cleared more than 54,000 tonnes of gold according to the same report, roughly three-quarters of global physical volume, giving Beijing a foundation on which to expand its role as custodian.

With this in mind, the push coincides with shifts in the global reserve system. The freezing of around $300bn in Russian assets in 2022 exposed vulnerabilities for countries keeping reserves in Western institutions, accelerating diversification strategies. That same year, official sector gold buying reached 1,037 tonnes, the highest level since the late 1960s.

Bullion prices have also more than doubled in two years, reaching almost $3,790 per ounce in September 2025, which has served to demonstrate gold’s renewed appeal as a reserve asset. For China therefore, offering custody facilities not only reduces dependence on the dollar but also ties client countries closer to its financial infrastructure, bolstering the international role of the yuan.

To this end, Beijing has steadily expanded both its reserves and market footprint with official holdings reaching 2,235 tonnes in 2024, placing China fifth globally, though still less than half the level of the UK. In terms of foreign reserves though, gold represents just under 5% of China’s foreign reserves, leaving huge scope for further accumulation. This is particularly appealing in a country with a demand rate of 943 tonnes – as of 2023 – the highest worldwide.

London

For now though, London remains the dominant custodian, with the Bank of England safeguarding over 5,000 tonnes of sovereign reserves and the London Bullion Market Association (LBMA) overseeing around 90% of over-the-counter trading. Depth of liquidity, regulatory certainty and longstanding trust continue to underpin London’s supremacy in this regard.

As such, China’s pitch is less about market mechanics and more about geopolitics equiti adds. For emerging markets wary of Western sanctions freezing their assets, Shanghai offers an alternative, even if concerns remain over legal protections, liquidity, and the accessibility of reserves held within China’s jurisdiction.

Benefits and risks

At present, as equiti and even individual gold-buyers have said, for participating countries interested in an alternative to London, the attraction lies in reduced exposure to dollar-based sanctions, a stronger hedge against currency risk, and closer ties to China’s economy. Yet these advantages come with drawbacks: limited liquidity compared with London, the possibility of political fallout with Western allies, and lingering questions that will not go away any time soon - over the security of assets held under Chinese jurisdiction.