Xi Jinping’s vast gold war chest could let him take Taiwan without a fight

The time has long gone to claim that Xi would never make the mistake of invading Taiwan
The time has long gone to claim that Xi would never make the mistake of invading Taiwan - CHINA DAILY/Reuters

Xi Jinping has benefited in many ways from Vladimir Putin’s brutal invasion of Ukraine, not least in his single most important personal goal: to go down in history as the Chinese leader who annexed Taiwan in defiance of the West. 

Xi has seen what Western sanctions on a brutal aggressor amount to. He has spent the last two years sanction-proofing the Chinese economy by all means possible, doubling down on transactional relationships with his cronies in the so-called ‘Global South’, securing massive supplies of oil and gas and – most recently – buying up gold on a scale that is astonishing even by Chinese standards.

How should the West understand his tactical purposes in all of this, and more importantly, what is the strategic context?

First, let’s consider the gold. In the last 17 months alone, China’s declared gold reserves have soared by 17pc to nearly 73 million troy ounces, currently worth $170bn (£135bn). There are other indications of additional large-scale purchases off-grid as well. Concurrently, China’s foreign exchange reserves have been built up to their highest level since 2015.

All in all this looks like a war chest, intended to be proof against harsh Western sanctions which, following the Ukraine model, would likely follow a Chinese invasion of Taiwan.

The time has long gone – however fashionable it was once in some Western circles – to claim that Xi would never make the mistake of invading Taiwan. The idea was that the Chinese Communist Party (CCP) would struggle to achieve a victory; that it would cost too much blood and treasure for the fragile regime to survive, even if escalation into regional or global conflict did not result.

Pundits lined up to point out that though Xi had ordered his armed forces to be “ready to invade Taiwan by 2027”, this should not be read as implying the intention of doing so.

Xi Jinping may well have reached a similar conclusion based on ground truths five years ago. But following the surge of competitive tension with the US and the West, access to cheap Russian energy on a virtually limitless scale since the West cut down its imports, Western weakness on Ukraine, and the chance to manipulate relations with Iran and other cronies to its favour, Xi has adopted a more resilient and implacable strategy.

This approach is embedded in the notion of “combat readiness”, a phrase Xi employs with increasing regularity in public statements. This is much more than military capability – it is a new way of describing the Chinese military concept of “war without limits”. The concurrent aims of “combat readiness” go far beyond even victory over Taiwan, encompassing the notion of triumph in an existential Marxist struggle against all China’s opponents and rivals, and the dawn of a new era in which China will be the dominant world power.

By watching Putin's war waging, Xi has seen what Western sanctions on a brutal aggressor amount to
By watching Putin's Russia, Xi has seen what Western sanctions on a brutal aggressor amount to - SPUTNIK/REUTERS

A quick survey of current Chinese geostrategic activity suggests that this process is well under way. In the kinetic sphere, China is moving rapidly towards doubling its stockpile of nuclear warheads from around 500 to 1,000 by 2030, with the aim of reaching 1,500 as soon as it can thereafter. Even if China decouples from its current de facto military alliance with Russia against the West, this agenda is clearly intended to overthrow the balance of nuclear power in favour of authoritarian states.

China’s militarisation of space, too, in particular anti-satellite capabilities, already risks outstripping the capabilities of the US and its allies. New missile technologies now in Chinese production are potential game-changers in regard to control of regional and international maritime space. In combination, it is likely that China’s WMD doctrine no longer excludes willingness, not far in the future, to face down the West in the event of a slide towards open hostilities.

While China’s economic strategies have failed to revive domestic growth to the levels deemed safe for regime stability, Xi appears to be willing to risk this decline as long as social stability can be enforced by repressive digital and other public order measures.

He is doubling down on trusted foreign suppliers of vital raw materials for industry, energy and food, while continuing unchecked to plunder endangered natural resources across the world, including much of the Pacific, Polar regions and the Southern Ocean. Energy security is being consolidated by increased land-based imports from Russia and Central Asia, with some major contracts signed for up to 30 years.

Chinese exports of renewable energy technologies are better understood as an extension of strategic influence than commitment to tackling climate change. China’s favourable balance of trade in economic interconnection with the West has similar political ramifications, as is clear in the case of Germany.

Chinese exports of renewable energy technologies are best understood as an extension of strategic influence
Chinese exports of renewable energy technologies are best understood as an extension of strategic influence - Andrea Verdelli/Bloomberg

Hard as it is to confront this many-faceted reality, China’s hybrid espionage, disinformation, influence and cyber conflict with the West is well under way, with the dual aim of intelligence collection and establishing means to inflict pre-emptive paralysis and havoc on opponents’ defence infrastructure, energy infrastructure and social order in advance of armed hostilities.

That is why this war chest matters. It is there, like Beijing’s hypersonic missiles and nuclear weapons – not to enable an attack on Taiwan at a chosen date, but to ensure that with the balance of power changing in China’s favour, it will not be needed.

Xi is betting on political disarray and disunity among the US and his Western allies – as displayed in Ukraine – and if his plans go ahead unchecked, he will be able to absorb Taiwan without a fight. That, not futile second-guessing of the date of Xi’s invasion plans, is the geostrategic challenge that China now poses to an already fragmented, poorly led and introspective Western alliance.