This Data Shows Chinas Prepping for War
Summary
➡ The LBMA gold price’s decreasing transparency might explain the Shanghai gold premium’s disparity, potentially hinting at defensive financial measures taken by China. In parallel to its financial activity, China’s increased shipbuilding efforts for “roll-on roll-off” vessels hint at a strategic move towards an offensive stance, with speculation around their use in a potential invasion of Taiwan. Beijing’s 2016 law which mandates Chinese maritime companies to aid military operations in national interest conflicts could signal a potential military use of these vessels. Furthermore, China’s recent naval position in the Middle East, along with President Xi’s advocacy for a ceasefire to avoid humanitarian crisis, suggests preparation for potential conflicts both in the Middle East and Taiwan.
Transcript
This data shows that China is preparing for war. Now, headlines have been showing China’s dumping U. S. Treasuries and securities to prop up yuan, as they’ve just unloaded another 16. 4 billion of U. S. Treasuries just last month. But if you look at the other data found in the news headlines, and specifically where they’re spending their money, it shows you a completely different picture, and that is that they are getting ready for something big.
So, in this video, I’m going to break down what China has been doing and saying for the last decade. More specifically, we’re going to look at the data in their financial numbers of what they’re buying and selling and what they’re actually doing so we can get a better understanding of what’s really going on as things unfold. So let’s go. All right, welcome to the Channel. If you’re new, my name is Mark Moss.
I make these videos to change the way you think about money, because almost everything you’ve learned is wrong, and almost everything that you’re reading is somewhat misleading, lacking context. And so I want to make it easy to understand so you know what the heck is going on, so you can stay one step in front of this. Now, I want to talk about China and what they’re doing right now that should concern all of us.
But before we do that, I want to get some context so you can better understand this. So let’s start with looking at Russia, because I believe what China is actually doing is watching what’s happening to Russia. So, you already know this. Russia is under extreme sanctions from the US. And NATO after their invasion of Ukraine in 2022. But what you might not know is that the Russian Federation had already started an accelerated process of de dollarization back in 2014, after the United States government threatened to disconnect Russia from the Swift system.
Now, in 2017, Russia announced that they had begun working on a replacement of the Swift financial transfer system, which is, of course, one of the main tools that the US. Uses for sanctions. And sure enough, in February of 2022, the US. And its allies blocked certain Russian banks access to the Swift international payment system. The goal by the US. And NATO was to prevent Putin from using their $630,000,000,000 in Central Bank foreign currency reserves in the invasion of Ukraine, and, of course, to defend itself from the plunging ruble.
Now, although Russia had already started working on its de dollarization plans a decade before, it wasn’t fully able to get out of the danger of the US. And NATO grabbing their money. And of course, China watched all of this unfold. Similar to Russia, China had also begun its de dollarization twelve years ago. And since 2011, China has been gradually shifting from trade in US. Dollars and in favor of the Chinese yuan.
In March 2018, China started ditching the dollar for buying oil and instead began using a gold backed yuan in March 2022, multiple reports claim that Saudi Arabia was in talks with China to start trading Saudi oil and gas to China in Chinese yuan instead of dollars. And then in December of 2022, at China at the GCC summit, president Xi Jinping called openly for oil trade payments to be settled in yuan.
Now, with Chinese Foreign Minister Wang Yi stating that Chinese Arab relations experienced a, quote, historic improvement. And we know this was escalated by what China saw happen with Russia. And of course they did. It worried every nation in the world. If it could happen to one of three global superpowers with nukes, it could happen to any of them. The freezing of more than 300 billion in Russian Central Bank foreign currency assets and the removal of Russian banks from the Swift Interbank Payment System were very worrisome for China, given that they have more than 3 trillion in foreign exchange reserves and it’s an export dependent economy.
Now, the sanctions China witnessed against Moscow prompted hundreds of Chinese economists, financiers, geopolitical analysts to examine how China should mitigate extreme scenarios, including a loss of access to US dollars. Chen Hong Xiang, a researcher at a branch of the People’s Bank of China, the PBOC, wrote, quote, in the context of intensified Sino US. Strategic competition and the Taiwan Strait conflict, we should be wary of the US replicating this financial sanction model against China, end quote.
And then he went on to say that China should, quote, prepare for a rainy day to ensure its financial and economic stability, end quote. Now, according to Chinese government affiliated researchers studying the Western response to Russia after its invasion of Ukraine, they said in a war with the US over Taiwan, china would need to create a global network of companies under US sanctions, seize American assets within its borders, and three, issue goldenominated bonds.
So there you have it. They laid out their war preparation plans. So now let’s see exactly what they’re doing. From what we’ve seen already, it’s clear that China is preparing to cut all ties to the US and the US dollar in case of a conflict. We can see that China is rerouting and domesticating the payment chains that parallel supply chains. They’re reducing their dependency on foreign non friendly capital.
They’re liquidating American sanctionable investments abroad. They’re pulling economic allies closer and away from the west. They’re liberalizing domestic yuan accounts for users and preparing financial alternatives for the region, such as payment networks for Swift and the global reserve asset replacement, which is gold for US treasuries. They’re trying to ensure that any future potential sanctions will be less of a problem for them than it was for Russia had.
If Taiwan becomes a big problem, which it most certainly will, it’s as if they’re sending a message to their friends that, one, they can be relied upon, and two, to the potential enemies that they mean business. So with this lens, now let’s look at the financial data to understand what they’re really up to because without this context these moves could be interpreted differently well, you know the saying put your money where your mouth is? Well, that’s exactly what China seems to be doing so some of the data that seems to be maybe getting wrong from some people without this context is that China has cut its holdings of US.
Treasuries to 805,000,000,000 which is the lowest level since 2009 now, side note there’s been some confusion on this chart has China actually been selling their Treasuries or is the value of the Treasuries dropping? Now, there’s been some debate, and the answer is actually both the US Treasury the Tic data has been changed as of February of 2023. So we can now track this better. So we can see that they’re selling Treasuries and the value has been dropping, and we can see that they’re ramping up the selling.
In August, China unloaded another 16. 4 billion of us. Treasuries china has been dumping US. Treasuries by the amount of about tens of billions per month since their peak roughly a decade ago china’s unloaded nearly $500 billion worth of US. Treasuries half a trillion the flight away from US. Treasuries is historic. And it’s not just treasuries. China is also selling the most US. Treasuries in four years. All of this in the backdrop of the Fed raising rates.
And US. Deficit spending is now above World War II levels. And we got Janet Yellen saying that, yes, the US. Can afford to fight two more wars at the same time. Now, some of the news headlines are saying that China’s dumping these treasuries because the yuan is weak and they’re trying to prop it up, or that they’re in bad financial shape, which they are. And of course, people are saying that they just need the money.
But if that was the case, then where are they getting all the money to continue their record breaking gold purchases? China’s continue to accumulate gold in order to diversify its reserves. And all this gold buying and demand from China has pushed the prices up to new records. With China’s local gold price premiums over $100 more than is being priced in US dollars. Now, a Chinese premium is normal due to import controls and gold becoming a scarcer commodity relative to other markets where it flows freely.
So it’s normal to see gold’s premium between five dollars to fifteen. Dollars an ounce more, but not $100 an ounce. So there’s got to be something else going on here, and maybe we have a couple more clues. There was an article that came out last week on Bullion Star, and it was titled, why Have All Chinese Banks Disappeared from the LBMA Gold Price Auction? Interesting. Now the LBMA London Bullion Market Association basically sets the price of gold and what we’ve seen is an exit of Chinese banks.
Back to the article. It said the exit of the Chinese banks raises questions as to what this has done to the auction liquidity and price discovery as the auctions are not reflecting supply and demand of gold. From China, the world’s largest gold miner, gold importer and gold consumer. At the current time, there’s not even one Chinese bank left in the London gold auction. So now that the Chinese banks have disappeared, this implies that there’s a decrease in transparency and a worse representation of the market price.
And all the while, the LBMA gold price is used in everything from the daily valuation of gold backed to ETFs, to the valuation of billions of dollars worth of ISDA gold swaps and other gold derivatives, to the strike prices of options, to the month in valuations of central bank gold holdings, all kinds of things. And this might also lead us to the reason why the Shanghai gold premium has diverged so much lately from the LBMA gold price.
And now that they have that all complete, it’s time for the final stages, and that is war. In addition to the defensive financial maneuvers that China’s been taking, we can see they’ve also been ramping up their offensive stance. A recent article from Newsweek explained how China is ramping up its shipbuilding to help it invade Taiwan. They cite a new report by the center for Strategic and International Studies, the CSIS, showing that the China Power Project has said that China’s rising production of row row vessels, or what we call roll on rolloff vessels, could signal a dual strategy to use these vessels in an attack on Taiwan.
Political and military leaders in Taipei have spent decades trying to deter an amphibious invasion across the Taiwan Strait. The roll on rolloff ships transport cars, trucks, buses and trailers to offshore locations, and the railroad vessels have become a pivotal means of transporting electric vehicles manufactured in China to locations around the world. However, China’s military strategists have mold over the idea of using these railroads during an attack on Taiwan.
Beijing passed a law in 2016 that makes it mandatory for Chinese maritime companies to assist with military operations in defending national interests. The company’s rowros could be called on during an attack on Taiwan. There are more than 700 row ships worldwide, and in an analysis by authors of the CSIS, they said that Chinese shipyards may deliver up to 200 rows between 2023 and 2026, and they are using their navy.
New reports showed that the China PLA stationed up to six warships in the Middle East over the past week amid rising tensions from the Israel Gaza War with up to six Chinese warships, they are now operating the Middle East over the past week, and Chinese President Xi he’s been upfront with it. He’s been upfront with his views on this conflict. October 19 chinese President Xi Jinping reaffirmed Beijing’s long standing position in favor of establishing a sovereign state of Palestine, as reported, of course, by state media.
He emphasized that this approach represents the fundamental way to resolve the ongoing conflict in the region. Which sounds about right, as long as both sides would be rational and would be willing to sit down and both make concessions. He went on to say that the top priority now is a ceasefire as soon as possible to avoid the conflict from expanding or even spiraling out of control and causing a serious humanitarian cris.
So sounds like some pretty rational words from President Xi. I wish President Biden and the rest of the people involved would also have cooler heads. But either way, it looks like China is preparing not just for potential war in the Middle East, but also to go after Taiwan. But what do you think? Let me know in the comments down below. Does all this evidence lead up to the fact that it looks like they’re getting ready for a war? Or like us, mainstream legacy media is telling us, are they just in bad financial shape and they’re selling their treasuries because they’re broke? Let me know what you think in the comments down below.
Of course, as always, give me thumbs up if you like the video. If you don’t, you can give me thumbs down. That’s okay. At least tell me why in the comments down below. Subscribe if you’re not already subscribed. And that’s what I got. To your success. I’m out. .
