The two giants of the United States, Yellen and Blinken, visited China one after another, sending a "showdown" signal in many fields, which aroused great vigilance on the Chinese side. There is news in the international financial community that a large number of US bonds held by China have been exchanged for reserve gold almost overnight. This shows that China is preparing for the worst for the worst scenario for the United States to impose broader sanctions on Chinese assets and key industries.
U.S. Secretary of State Antony Blinken's plane has arrived in Shanghai for an official working visit to China, and just three weeks ago, U.S. Treasury Secretary Janet Yellen paid an official working visit to China. Both Blinken and Yellen have visited China for the second time since taking office, and have signaled a "showdown" with China in the economic, diplomatic, and security fields, respectively.
(Ranking of the largest holders of U.S. Treasuries as of January 2024)
The United States has been having a bad time in the world recently: the Ukrainian government has no hope of defeating Russia and winning even with the latest US assistance; the conflict between Israel and Hamas continues, and there is no hope of completely eliminating the Hamas forces, while Iran and Lebanese Allah are also eager to try, and the Middle East war is in danger of expanding; both wars involve a lot of energy from the United States, making it impossible to implement the grand strategy of "concentrating on East Asia to deal with China".
In the United States, although the economic data released by the US government shows that "the situation is very good", the international financial community has generally stopped believing the US government data. In the current international market, the prices of the US dollar, US stocks and gold have all gone up, which is obviously abnormal.
(The U.S. national debt has reached $34 trillion)
In this context, Blinken has made it clear that China needs to cooperate with Western sanctions against Russia and Iran, stop purchasing oil and gas from Russia and Iran, and also demand that China stop exporting so-called "dual-use" materials to Russia;
Not long ago, the U.S. Congress proposed a bipartisan bill called the "No Limits Act", requiring Chinese military enterprises to withdraw from the Russian market within 180 days, otherwise they will face "comprehensive blockades and sanctions", in fact, this bill sanctions not only Chinese military enterprises, but also some Chinese civilian automobile companies;
Recently, the US media also revealed that the US government is drafting a sanction to cut off some Chinese companies from the global financial system, hoping to prevent "China's support for Russian military production", and these measures were promoted by US Treasury Secretary Janet Yellen after her visit to China.
(This "No Limit Bill" was again promoted by the notorious anti-China MP Gallagher)
These measures have aroused China's vigilance and counterattack. According to the Federal Reserve, China sold $22.7 billion worth of U.S. Treasury bonds in February this year, and now China holds a total of $775 billion in U.S. Treasury bonds, ranking second in the world, and in 2012, when China's holdings of U.S. bonds peaked, it reached $1.3 trillion, and now Japan has completely replaced China's position that year. If China continues to reduce its holdings of US Treasuries, it will soon fall below the UK and fall to third place. Of course, the higher the ranking, the better, especially today when the U.S. government adds a trillion dollars to its national debt every 100 days.
Today, the total national debt of the US government has exceeded $34 trillion, and if the Fed continues to raise interest rates, the US government may need to spend more interest on the national debt this year than the US military spending. Everyone knows that this is unsustainable, and the US government should not say that it cannot repay the principal of the national debt, and if this development continues, it may not even be able to pay the interest on the national debt, and without the issuance of bonds and printing money, the bubble of the US economy will burst.
The U.S. government has embarked on a "Ponzi scheme" of borrowing new debts to pay off old debts, and no one knows when this farce will break. Therefore, countries around the world are rushing to buy gold to replace US bonds. According to Bloomberg, China has purchased more than 2,800 tonnes of gold from overseas markets over the past two years, equivalent to one-third of the gold stocks held by the Federal Reserve. And it's not just the Chinese government that's doing it, it's the rest of the world, which is the main reason why the price of gold has soared to more than $2,400 an ounce.
(Ukraine is unlikely to win even with US assistance)
This shows that China is preparing for the worst-case scenario for the United States to impose tougher and broader sanctions on Chinese assets and key industries. China's abandonment of U.S. debt and the use of gold as a financial reserve to preserve its value are mainly "defensive". But this act itself is also a blow to the credibility of US bonds and the dollar, which is an "offensive".
In fact, China has long been prepared for US sanctions. According to Russian sources, at the end of 2023, the trade volume between China and Russia has exceeded 240 billion US dollars, of which ninety percent has been paid in local currency, that is, it is only one step away from completely abandoning foreign currencies dominated by US dollars.
So even if the U.S. sanctions Chinese financial institutions related to Sino-Russian trade, it is easy for us to circumvent U.S. restrictions. On the other hand, China's military enterprises have been sanctioned by the United States for decades, and they don't care about the United States increasing sanctions, and the Chinese auto companies on the sanctions list of the U.S. "No Restriction Act" have basically realized the localization of the entire supply chain, and they are not afraid of U.S. sanctions.
Therefore, if Blinken comes to talk to us about things with a threat during his visit to China, he is destined to kick the iron plate.