China’s almost ready. Its first aircraft carrier capable of going toe-to-toe with the US embarked on its first sea trials this week. Its combat jets are circling Taiwan daily in ever-growing numbers.
And evidence increasingly suggests it has gathered enough supplies to endure an extended siege – or topple the world economy in its favour.
“China is preparing for something major. That seems increasingly obvious judging from the stockpiling of important resources,” warns Andreas Larsen, CEO of US investment firm Steno Research.
But international analysts are split.
Is Chairman Xi Jinping preparing for an invasion of Taiwan? To seize Philippine and Japanese South and East China Sea islands? To take the Himalayan high ground from India? All three?
Or is he about to unleash an economic assault on the established global trade system designed to topple the US dollar, cement China’s position as the dominant exporter of manufactured goods, and give it a strategic chokehold over critical minerals markets?
Former head of the US Office of Naval Intelligence Michael Studeman triggered a storm of speculation when he published a commentary, “China is battening down for the gathering storm over Taiwan”, in the military journal War on the Rocks last month.
“A storm from Beijing is heading to Taiwan,” he wrote. “Although hopes were high that the Russo-Ukrainian War might deter Xi from folly over Taiwan, nothing in his behaviour, speech, or actions so far suggests he is learning anything other than how to better prepare to subjugate Taiwan.”
He points to its rapidly expanding reserves of oil, iron ore, aluminium, cobalt, copper, zinc and rare earth elements as evidence.
Siege mentality
Nazi Germany and Imperial Japan were defeated only after their economies were starved of oil and the high-quality materials needed to sustain their war efforts.
The Western world responded to President Vladimir Putin’s 2022 invasion of Ukraine by imposing punishing economic sanctions. But the Kremlin has since managed to bypass many of these by selling oil through its “dark fleet” of tankers to China and India – and buying crucial components from China, Iran and a global black market.
“Xi seems to have studied the sanctions playbook the West used against Russia over Ukraine and subsequently initiated long-lead protective measures to batten down the hatches of China’s economy to resist similar pressure,” Studeman argues.
His commentary follows a study in the Journal of Indo-Pacific Affairs, published by the US Air Force’s Air University.
It says Beijing has ordered its National Food and Strategic Reserves Administration to stockpile strategic materials, using State-subsidised processes to control supply.
The implications are not only military, it adds.
“Given that global trade volumes for many of the stockpiled minerals are relatively modest, China’s stockpiling — or speculation thereof — can increase global mineral prices. The release of minerals — or rumours thereof — having the opposite effect.”
Dei Gratia Minerals principal Gregory Wischer recently wrote for the Australian Strategic Policy Institute (ASPI) that stockpiling is a win-win scenario for Beijing: “It provides a strategic stockpile for national emergencies, such as a war, and defends local industries against severe price fluctuations.”
Military assault?
“Xi is militarising Chinese society and steeling his country for a potential high-intensity war,” argues Studeman. “China’s trajectory signals deepening danger and a hardening of Xi’s intent to execute an act of aggression similar to Russia’s invasion of Ukraine.”
US Indo-Pacific Command outgoing chief Admiral John Aquilino last week warned while on a tour of Japan that Chairman Xi wants his military capable of seizing Taiwan by 2027.
And this week he told US media the “security environment has changed drastically, and not in a good way”.
“They (Beijing) have clearly made a risk determination that taking aggressive actions is within their interests and to the benefit of their strategic objectives. They continue to be more aggressive in a variety of areas. They’re challenging the current international rules to benefit an authoritarian society that does not provide benefit for anyone else in the region.”
It’s not the first time the 2027 date has been raised.
CIA Director Bill Burns said his agency had intelligence indicating Xi had issued the Peoples Liberation Army (PLA) with a strict deadline shortly after taking power in 2013. And analysts say recent sackings, shake-ups and restructuring within the PLA indicate this is still being enforced.
But the war in Ukraine has emphasised the oldest military lesson in history – that wars are won by logistics, not tactics.
“Both nations required access to ample secure mineral supplies to sustain their heightened defence production and sizeable military forces,” the Air University report states. “Potential mineral shortages could severely undermine US military capabilities amid the intensifying rivalry with China.”
Ukraine repulsed Russia’s overwhelming invasion force after supplies of antitank and anti-air missiles were rushed into the country once the pending invasion became obvious.
It’s now in retreat following Moscow’s success in sidestepping sanctions enabling it to rebuild ammunition stocks and US Republican Party stalling tactics delaying fresh support for Kyiv.
This has shaped the European Parliament’s perspective on Chairman Xi’s hoarding: ‘China’s stockpile is growing to secure reserves in the event of a conflict,’ a recent report reads.
Economic assault?
“China may have domestic reasons for mineral stockpiling, but its activities affect prices globally. In particular, it can force prices below the minimum levels needed by foreign producers to remain operational,” Wischer argues.
The White House, Wischer states, believes Beijing’s stockpiles allow it to be ‘more interventionist in markets, actively combating price volatility or supporting particular industry segments’.
One stockpile, in particular, emphasises an economic move.
China has been on a gold-buying spree. This has pushed the precious metal – often used to underwrite or bypass international currency exchanges – to record highs.
Analysts speculate this may be in preparation to break the global dependence on the US dollar by establishing the yuan as a new standard for international trade.
And destabilising the existing global economic system through cut-price exports and disrupted mineral supplies may pave the way to achieve this.
Beijing is already accused of flooding US and European markets with low-cost steel, chemicals and electric vehicles. And it repeatedly threatened to cut critical minerals exports last year before issuing a total ban on supplying processing technologies to foreign markets.
While the US, Japan, and Korea maintain mandated strategic mineral stockpiles, these smaller reserves are tailored for emergency response, such as when earthquakes or hurricanes damage vital infrastructure.
And commercial entities, driven by the need for efficiency to maximise shareholder returns, prefer to operate according to a “just in time” delivery principle.
This leaves them intensely vulnerable to supply shocks – such as the Covid-19 pandemic and the missile attacks on shipping in the Red Sea, or recent extreme weather events in China, Africa and South America.
“If the US, Australia and partners established and similarly managed mineral stockpiles, they’d have an important capability: dampening market manipulation by foreign actors, including the Chinese government and major Chinese companies,” Wischer concludes.
Jamie Seidel is a freelance writer | @JamieSeidel