China has been hoarding gold and oil for several months: is it preparing a commercial “nuclear bomb”?

China has been hoarding gold and oil for several months: is it preparing a commercial “nuclear bomb”?
China has been hoarding gold and oil for several months: is it preparing a commercial “nuclear bomb”?

For several months, Beijing has been active. Unusual movements are taking place on the financial markets. Significant resources are being accumulated and international observers are wondering: what is China preparing? While no one can say for sure, economists advise to expect strong action from Beijing, explains Newsweek.

What worries most is the possibility of a devaluation of the yuan. Intentionally dropping the price of the Chinese currency would absolutely disrupt all commercial relations in the world. The economic equivalent of a nuclear bomb, experts say. In other words, a return to normalcy would be extremely difficult after such an act and would make China all-powerful.

China: in social credit pilot cities

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A devalued yuan would be equivalent to a significant drop in prices for its production and therefore to greater export demand. This would eliminate a large part of international competition in terms of trade, particularly for products from the United States, for which the trade war with China is not new.

Billions of grams of gold accumulated

One of the signs that alert economists to this great Chinese coup to come is the accumulation of gold by the State. Despite the extreme prices of the metal and a very low yuan rate, the Chinese central bank continues to acquire new gold reserves. For the 17th consecutive month, in April, it acquired several thousand troy ounces – a unit of measurement used for precious metals, a troy ounce corresponding to approximately 31 grams – thus accumulating 72.74 million troy ounces of gold.

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“The official accumulation of gold reflects a desire to diversify reserves useful for international trade without relying on the dollar or other Western currencies”, explains Eswar Prasad, former member of the IMF and professor at Cornell University. These acquisitions could therefore be a way to distance itself even further from the United States and its king currency.

China seems to want to gain independence from Western currencies

But China doesn’t stop at gold. Beijing has also purchased a huge amount of oil in recent months. In 2023, the country reached a record by purchasing an average of 11.3 million barrels per day. An increase of 10% compared to the previous year which must be qualified when we know that gasoline needs have returned to their pre-Covid level following the lifting of restrictions.

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These major moves come as China provides operational support to Russia in its war against Ukraine, even as Moscow and Russian companies are under Western sanctions. It is by analyzing these sanctions that the Chinese authorities are perhaps weighing the pros and cons of a military invasion of Taiwan. If Beijing decided to act on this plan, the international community would undoubtedly be up in arms and ready to cut off its supplies. By accumulating resources upstream, China may be building its own safety net.

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