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Our guess? No doubt China is buying gold direct from its miners. That metal is then lacking for retail consumption. So to ensure lots of supply for what proved another strong Chinese New Year, importers booked early and often. But following that trebling of gold imports in 2011, the timing of SAFE's move, immediately after New Year - and only two weeks after India doubled its gold and silver import duties - suggests Beijing is live to the trade-balance risks posed by Chinese households' soaring demand.
"IMF slashes forecast for China current account surplus," announced the Wall Street Journal last week.
"China's current account surplus for 2011 shrank to $201.1 billion ($187.37bn), from $305.4bn in 2010. More important, as a ratio of gross domestic product, the surplus fell to about 2.7%...close to a decade-low."
Now, "as China's trade surplus declines dramatically," reports University of Peking professor Michael Pettis, "more and more people within the country are calling for interventionist steps to halt the decline, including depreciating the [Yuan], or at least halting its appreciation."
Pettis' comment should remind us that Beijing is a big bureaucracy, with lots of divergent views and voices. Devaluing the Yuan would look a highly aggressive decision to its would-be friends in Washington, especially those US politicians talking up China's "violations" of international law. But trying to stem - or rather slow - the pace of import growth wouldn't look quite so rude.
This new rule is already frustrating those banks importing gold, but it's likely only to delay, rather than deter, the flow of bullion. Still, it's a hat-tip to the potential drain on China's foreign currency holdings which gold has become for India - still the world's No.1 consumer, and importing twice as much as bullion as China in 2011 because it has no domestic mine output to help feed its consumption, whether central-bank or private.
India's hunger for a metal it does not produce is plain to see in its trade balance. The only current-account deficit in the region as Morgan Stanley notes, this gold-heavy outflow of cash also weighed on the Rupee's exchange rate in 2011, down 15% versus the Dollar as the currency markets tried to force an adjustment.
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