I don't hold any CNY, but I also don't import stuff directly from China.

Telling people to keep their reserves in CNY while preventing them from investing in China or taking their currency abroad is indeed difficult.

If you have too much CNY because you're one of the few countries that runs a trade surpluss with China (e.g. Saudi), you can show up in Shanghai, Hong Kong or London with offshore CNY and demand physical gold settlement which largely solves this problem.

The gold is then sourced from 2 places most of the time (The US or the UK) because mainland China gold cannot leave China.

The US can then deliver the gold and:

1. Not let the price of gold rise by allowing paper gold market leverage to rise in London and NYC (Deliver the gold but sell more paper gold to keep gold's price from rising). This prevents gold purchases from devaluing the USD in gold terms.

2. Deliver the gold and let gold's price rise as a result of the purchases. This devalues the USD via a rising gold price.

If the US/UK refuse to deliver the gold or run out, then China and Russia can reset the gold price to a higher level and devlue the USD.

It seems to me like when gold rises in USD terms, it makes it more and more obvious that the currency is being debased and the US' creditors won't get repaid in real terms.

As greenspan said: "Gold is the canary in the coal mine. It signals problems with respect to currency markets."

The US exports mostly dollars, bonds and weapons, whereas China exports a lot more stuff.

Gold is recognized as a store of value (money), whereas USD and CNY are currencies (medium of exchange but not store of value).

The big gold inventory thus lends a lot of credibility to their currency.

However, it is indeed true that they don't audit their gold holdings and the reports and underestimates.