*Exclusive: China’s Next Move is HQLA/REPO Status
A Framework for Repo Market Substitution
“Something was set in motion that is very hard to reverse”
-Andreas Steno, Steno Research
Intro: Replacing Treasuries
This document presents two complementary pieces. The first is an essay outlining our research and conclusions. The second is a supporting academic pdf at bottom for readers seeking a more formal treatment. Both focus on the evolving role of gold in global finance.
Our central finding is that China intends to move gold from its current Tier-1 status toward recognition as a High-Quality Liquid Asset (HQLA), unlocking its use in repo markets and trade finance. Such a change would allow gold to substitute for U.S. Treasuries as collateral within the BRICS system.
Recent events confirm the acceleration of this shift: U.S. repatriation of gold, China’s rapid alignment with India in BRICS, volatile lease rates and collateral strains, and the simultaneous draining of the LBMA by both China and the United States. These developments point to a system moving quickly toward a new equilibrium.
Gold as a Repo Asset to Challenge U.S. Treasuries
China is positioning itself for a monetary shift that could (will) redefine collateral markets. The country has accumulated thousands of tons of gold in recent years, and its vault1 and warrant systems are expanding.
