China dumps Treasuries and buys gold getting ready for war with US

China is getting ready for war with the United States not only in the military field. The People's Bank of China is dumping Fed government bonds and buying gold, including secretly.

Photo: Openverse by Japanexperterna.se is licensed under CC BY-SA 2.0

The US is pushing China to war

Anti-Chinese hysteria has been unleashed in the United States. Xi Jinping's power was recognised as a dictator and a direct threat to the existence of Western hegemony.

Washington declared Beijing an "accomplice of the aggressor” in Ukraine. The Biden administration is considering sanctions against Chinese banks in this regard. US sanctions are already in effect against a number of Chinese enterprises that supply "dual-use goods” to Russia.

Washington also claims that Xi is supposedly preparing an attack on Taiwan. The US is not happy about:

• China's "aggressive behaviour” in the South China Sea,
• "excessive” exports of cheap Chinese goods,
• "green transition"
• automotive industry,
• high technologies.

Washington is telling Beijing point blank: shut down these "excess industries.”

The US also entered into a security pact with Australia and the UK against China and has deployed a medium-range missile attack system in the Philippines that reaches the Chinese coast.

China is preparing for war

Based on these and other negative factors, one may assume that China is preparing for war with the United States.

China has taken the following measures:

• In July 2022, a law was passed against separatism which made it possible to resolve the Taiwan issue through non-peaceful means;
• mobilisation procedure was changed to call up experienced military personnel,
• defence spending was increased,
• spending on the introduction of AI in the army was increased as well.

Xi called for the creation of world-class military medical universities, stressing that they should focus on the "battlefield and the troops."

China is actively dumping American government bonds (Treasuries) to prevent the confiscation of its assets, as the United States recently did with respect to Russian assets by adopting the corresponding extraterritorial law.

At the same time, the People's Bank (PB) of China is buying gold in order to be able to convert it into weapons, if need be.

China took account of the story with Russian assets abroad

China's treasury holdings dropped from about $1.1 trillion in 2021 to $775 billion in 2023 and hit a 14-year low as per the latest data from the US Federal Reserve. In February, China sold another $22.7 billion in Treasuries.

Foreign investors, including Chinese ones, were attracted to the idea of buying US government bonds to refinance the American economy. Yet, they have been withdrawing from Treasuries lately, because the US budget has been suffering from a huge deficit month after month ($2 trillion).

At the same time, US Treasury yield continues to rise. This is a big problem, given that Washington spent $522 billion on debt interest payments in the middle of fiscal year 2024 alone. This is 35.9 percent more than in the same period in fiscal year 2023. It is worthy of note that USA's debt is astronomical — more than $34 trillion.

Gold as a new weapon

Gold remains the only asset that rises in value regardless of Washington's whimsies. If there is a war, China will turn gold into a weapon.

The National Bank of China has added more than 300 tons of gold to its reserves since October 2022. As analysts write, the National Bank also buys gold secretly. Its total reserves exceeded 5,300 tons, which is more than 2.5 times higher than official data.

The Americans believe that the Chinese do not have anyone in the People's Liberation Army who has real war experience. They are convinced that the US Army will have an advantage. However, Russia has such experienced people, as well as experience of working as advisers to the PLA.

Meanwhile, China is creating a "perfect storm” situation in the United States by dumping treasuries.