Gold-Backed Currency, How China’s Yuan Could End Cheap Manufacturing
Gold-Backed Currency, How China’s Yuan Could End Cheap Manufacturing
As Good As Gold: 10-1-2025
Imagine a world where the global economic rules are being rewritten, not with abstract financial policies, but with something as tangible and ancient as gold.
This is the intriguing scenario explored in a recent video from As Good As Gold, which delves into the potential implications if China decides to back its currency, the yuan, with gold or adopt a gold standard.
The immediate question that springs to mind for anyone tracking global trade is: Wouldn’t a gold-backed yuan make Chinese manufacturing significantly more expensive, thus hurting its export competitiveness?
It’s a valid concern. Currently, the yuan operates under a fiat system, often kept relatively cheap to support exports.
The expert in the As Good As Gold video confirms that, indeed, if the yuan were backed by gold, its value would strengthen. A gold-backed currency is inherently more stable and robust compared to fiat currencies, which can be prone to inflation and devaluation. This appreciation would, by definition, raise the cost of Chinese manufactured goods in international markets.
However, the expert argues that this cost increase will not be the fatal blow to China’s manufacturing might that many might assume. Here’s why China appears to have a strategic advantage already in play:
Unlike historical examples such as Japan, which faced significant challenges and diversified production abroad when a stronger yen made its exports less competitive, China has been playing a different long game.
Through initiatives like the Shanghai Cooperation Organization (SCO) and BRICS, China has meticulously cultivated a massive, captive market encompassing an astonishing 70-80% of the global population.
This strategic market dominance means that even if the yuan appreciates due to gold backing, China can sustain its exports within this vast bloc. Many countries within the SCO and BRICS are increasingly open to trading in yuan or gold-backed currencies, effectively bypassing the Western fiat currency system and its potential vulnerabilities.
Beyond strategic alliances, China also boasts inherent strengths that provide a buffer against currency appreciation. Its advanced technology, particularly in consumer electronics, gives it a competitive edge that reduces sensitivity to currency fluctuations.
Furthermore, even with an appreciating yuan, China’s baseline manufacturing costs are still substantially lower than those in the West.
This significant margin provides considerable room to absorb the impact of a stronger yuan without completely pricing itself out of the market. Essentially, they have a larger cost cushion than many competitors.
A crucial element of China’s long-term strategy, as highlighted by the expert, is anticipating the potential instability of Western fiat currencies. Should these currencies face significant devaluation or collapse, the demand for Chinese exports paid in those currencies would naturally diminish.
In such a scenario, China’s gold-backed yuan and its large, strategically cultivated internal market through alliances like BRICS would act as a powerful economic shield, protecting its interests and ensuring continued trade on its own terms.
The discussion also touches upon the implications for other major players, such as Australia, the world’s third-largest gold producer.
If a new global trading system emerges based on gold or gold-backed yuan, Australia might find it increasingly difficult to sell its gold externally within the traditional Western financial framework. This could have significant economic impacts for Australia, forcing it to reassess its trade relationships.
In essence, the expert from As Good As Gold believes that China’s potential move towards a gold-backed currency isn’t a hasty reaction, but rather the culmination of years of meticulous long-term planning.
This strategy has already accounted for the evolving global trade dynamics, potential shifts in manufacturing costs, and the vulnerabilities of the current fiat system.
China’s strategic market alliances, technological superiority, and cost advantages are not merely mitigating factors; they are foundational pillars designed to ensure its economic resilience and continued global influence, even as it potentially ushers in a new era of gold-backed trade. This isn’t just about currency; it’s about a potential tectonic shift in global economic power structures.
For a deeper dive into these fascinating insights and to understand the full scope of this potential economic revolution, be sure to watch the full video from As Good As Gold.