VANCOUVER, Canada (Bullions Bull Canada) -- Since the Crash of 2008 exposed the global financial system as simply one big Ponzi scheme ticking down to implosion, one of the most public and emphatic economic policies of China's government has been the rapid/relentless accumulation of more gold reserves to "back" its own monetary system.

This economic priority has become an even greater imperative as China steadily replaces the U.S. dollar with the renminbi as the world's new reserve currency. Stage I of that process has seen trillions of dollars in bilateral trade agreements and currency-swaps.

Stage II was the establishment of a "renminbi trading bloc among seven of 10 of Asia's most prosperous economies, where the renminbi is now the reserve currency for these nations.

What is unclear is whether "Stage III" involves any overt action by China to spread the renminbi's official,reserve currency status or whether it simply involves passively waiting for the West to complete its self-destruction of the dollar-based system.

What is clear is that a central part of China's mission to have the renminbi assume the global mantle of "reserve currency" is to have massive gold reserves backing that currency.

China should add to its gold reserves to "ensure national economic and financial safety, promote yuan globalization i.e., the renminbi as reserve currency and as a hedge against foreign-reserve risks i.e., a dollar meltdown," according to Gao Wei, an official from the Chinese Department of International Economic Affairs of Ministry of Foreign Affairs.Wei made the above comments in the China Securities Journal Friday, according to a Bloomberg report. And later in the same article: "... In 2009, a State Council advisor in China stated that a group of officials and economists from Beijing and Shanghai established a "task force" to discuss measures to add to the nation's gold holdings.

"We suggested that China's gold reserves should reach 6,000 tons in the next 3-5 years and perhaps 10,000 tons in 8-10 years," the advisor noted.

This is where the question of how much gold China has (and how much gold China wants) becomes interesting. "Officially," China's gold reserves stand at 1,054 tons, and (also noted in the above source) this number has not been "updated" since 2008, when "it disclosed emphasis mine that its reserves had increased" from 600 tons.

Here both the mainstream media and even many commentators within the precious metals sector have done a terrible job in explaining the rules that relate to the reporting of gold reserves. It must be understood that legally/technically there are two entirely separate ways in which nations can add to their gold reserves.

Nations can purchase gold internationally/on the open market or they can acquire gold from domestic sources. If a nation accumulates gold in the former manner, it is required to report/disclose every ounce of reserves added (or sold) in essentially a real-time manner. However, if/when a nation accumulates gold from domestic sources, it has no obligation to report any gold acquired in that manner - ever.

This explains the writer of the above article making careful use of the word "updated" when referring to the increase in China's gold reserves, reported in 2008. This was a voluntary disclosure; in other words, it reflected gold reserves that China had added from domestic sources and which it had chosen to disclose.

At this point, those readers not already aware of this fact need to know that China is the world's No. 1 gold producer, and by a large margin. This is no accident.

Rather, it marks what can only be termed a "fanatic" drive to increase China's gold production as much as possible as fast as possible.

In 2002, China was the world's fourth-largest gold-producer, producing a (relatively) paltry 175 metric tons per year. By 2006, China had amazingly more than doubled that output to 360 tons/year -- at which point gold production flattened out, until a sudden/surprising surge in reported production by more than 12% in 2012, taking annual mine production to just over 400 tons per year.

This has occurred as gold-production has been eroding in most of the the world's other, leading gold-producing nations, most notably South Africa -- the former (longtime) No. 1 gold-producing nation.

This decline has occurred primarily through declining grades, rather than declining tonnages being mined, and by 2011 anecdotal reports were already coming out of China of a similar trend in its own gold production. One suspects that last year's sudden surge will not/cannot be repeated and that "Peak Gold" has now arrived in China as well.Of equally important note: none of this mined gold ever leaves China. Indeed, it is doubtful if any reaches its own domestic market. To service the private demand of its own citizens, China imports vast quantities of gold, now rivaling the near-legendary appetite for gold of India.

By 2011, China's gold imports had already soared to more than 800 tons per year (excluding the Hong Kong region). However, while India produces practically no gold of its own, China is the world's No. 1 producer. Clearly, China's mined-gold is the government's gold.

This brings us to some number-crunching. In 2001, China reported an increase in its national gold reserves from 394 tons to 500 ton. Then in 2003, it announced the increase to 600 tons. By my calculations, from the beginning of 2002 China has produced approximately 3,600 metric tons of gold. However it has reported only a total increase in its "official" gold reserves of roughly 650 tons.

Even if we assume that some of that remaining 3,000 tons of gold production leaked into its own domestic market (despite the best efforts of China's government), there is a vast amount of mined gold in China that has not been accounted for, and we must strongly suspect that most/all of that gold is securely stored in government vaults.

In other words, instead of having only 1,054 ton of gold reserves, it's quite possible that China could have as much as four times that amount: 4,000 tons. This would make the previously announced goals of China's national "task force" still attainable.

Note that this 4,000-ton figure could be a reality even assuming China had not accumulated any gold internationally. In other words, it could have actually bought gold directly and "broke the rules" in not reporting it, or simply had one or more of its government-directed proxies accumulating (and holding) gold on its behalf.

Thus it is possible that even the 4,000-ton estimate is conservative.This makes recent remarks attributed to no less than the vice governor of the People's Bank of China (its central bank) "inconsistent," to say the least.

The vice governor of the People's Bank of China (PBOC) Yi Gang said Wednesday that the country's gold reserves now stand at 1,054 tons, adding that a massive increase is unlikely in the near future.

What's of interest here is China's choice of mouthpiece for this suspiciously contradictory statement. They chose a central banker; individuals with a long history of pathological lying when it comes to gold.

Does any rational individual actually believe that China's real gold reserves are only 1,054 tons? Of course not. We can thus attach an equal amount of credibility to the last half of Gang's statement that "a massive increase is unlikely."

It seems that China has discovered the "bash and buy."

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.