Pelosi’s Taiwan visit will inflame US-China crisis, analysts warn

 China has escalated a campaign o

f threats and war-games to try to dissuade Nancy Pelosi from visiting Taiwan in the coming days. Beijing has publicly warned of “forceful countermeasures” to any visit, which would be the first by a US House of Representatives Speaker in 25 years, and has stepped up naval and air force man oeuvres around Taiwan. Chinese officials have even suggested to US counterparts the possibility of a military response. So intense has the reaction been to the visit, which is expected to be part of a trip to Asia in the coming week, that many analysts believe Beijing and Washington are heading into a new crisis over Taiwan. In a conflict that has been frozen since China’s Nationalist government fled to Taiwan in 1949, the US is trying to gauge whether this time the friction could bring it to the brink of war with Beijing. “If she goes, there will definitely be a Taiwan Strait crisis, and it will definitely exceed the last one in 1995-1996,” said Wu Xinbo, director of the Center for American Studies at Fudan University in Shanghai. “That is because China’s military capabilities by far exceed those of 26 years ago.” But Chinese scholars as well as former US officials with first-hand knowledge of the last crisis believe China still wants to avoid open military conflict with the US. “We have to take seriously the possibility that [Chinese president] Xi Jinping might order the People’s Liberation Army to engage at least in some limited use of military force and not just its display,” said Richard Bush, who was national intelligence officer for East Asia when tensions in the Taiwan Strait peaked in 1995. “But there are reasons it’s too risky for China to engage even in limited war. It is clear that the US would respond and they can’t be certain about winning,” he said. “Also, they still have confidence that the psychological warfare they’ve been engaging in over the past six years will work.” Matters have come to a head in the Taiwan Strait three times. In 1955, Chinese and Taiwanese forces exchanged fire after the PRC shelled offshore islands controlled by Taipei. In 1958, Taiwan won a naval battle triggered by another round of PRC shelling of offshore islands. The so-called third Taiwan Strait Crisis occurred almost 40 years later. Beijing fired missiles into waters off the northern and southern tips of the island after Washington allowed then Taiwan president Lee Teng-hui to visit in 1995. China also wanted to warn Taiwan against electing a pro-independence president in 1996. The US responded by sending warships into the vicinity in its largest display of military force in Asia since the Vietnam war. Former US officials agree that the Chinese military’s massive modernisation since then is likely to change Xi’s calculations. “It was a different PLA then and a very different China overall,” said Randy Schriver, a former US assistant secretary of defence under the Trump administration. He also served in the office of the secretary of defence responsible for managing relations with the PLA and the bilateral security relationship with Taiwan between 1994 and 1998. “In 1995, we knew they had limited capabilities and they knew. But the military reforms they have undertaken since were informed by that very crisis,” Schriver said. “Within a year, they purchased [Russian] destroyers with surface-to-surface missiles, and from 1996 they began thinking about how to hold US forces in the region at risk with cruise missiles.” Taylor Fravel, an expert on the PLA at MIT, said China’s expanded military capabilities would allow a more diverse reaction to a Pelosi visit. Officials in Taipei said that Chinese warplanes could cross the median line in the Taiwan Strait, a theoretical line dividing both sides that the PLA has crossed repeatedly in the past two years, and fly right up to Taiwanese sovereign airspace. Under another potential scenario discussed by Taiwanese officials, the PLA could impose a blockade on the Taipei-controlled South China Sea island of Pratas and prevent Taiwan from sending vital supplies, or even land and detain Taiwanese soldiers based there

. “The problem for China is that once whatever it is they have undertaken is done, they’re still in the same difficult position,” Bush said. “They don’t have a way to convince Taiwan to come to terms.” Analysts also argue that a limited use of force by China now might boost a more radical pro-independence candidate in Taiwan’s next presidential election in 2024. Ni Lexiong, a military analyst in Shanghai, suggested Chinese retaliation could range from sending warplanes and harassing Pelosi’s plane to supplying weapons to Russia. But any Chinese response would probably be measured. “The move has to be big enough and must at the very least cause fear in the adversary,” Ni said. “But this action needs to be controlled in a way that it will not trigger armed conflict.” Western analysts point to PLA scholars’ writings about the importance of controlling a crisis and argue that Beijing has not escalated its rhetoric to peak level. Recommended Edward Luce US and China are entering a trap of their own making Xi warned Joe Biden in a call on Thursday that “those who play with fire will perish by it”. That is a notch up from his government’s previous language but short of the phrase China used in the Korean war and other tense moments in cross-Strait relations, when it demanded that the US “rein in its horse at the edge of the precipice”. Still, stoking the tension is Beijing’s belief that the US is using Taiwan as a lever in an intensifying struggle over global dominance. “Since Trump, the US has been steadily raising its support for Taiwan, and they are using the Taiwan card all the time,” Wu said. US analysts add that US-China competition and mutual distrust are destabilising the situation over Taiwan. “It is all about US-China relations,” said Shelley Rigger, an expert on cross-Strait affairs at Davidson College in North Carolina. She added that Taiwan’s president Tsai Ing-wen has few options because she is facing both the threat from China and the need to retain the support of the US, Taiwan’s only protector. Rigger said: “She has guns to her head from both

China is About to Shock the World

 We are on the verge of a golden shock. I wrote recently about plans by the International Monetary Fund (IMF) to include the Chinese currency as one of the reserve currencies that back the IMF’s so-called Special Drawing Rights. Well, there’s another facet to that story that you need to know … and it echoes the warnings I first began voicing in early 2014.

 As part of the IMF’s plan to bring the yuan into the basket of reserve currencies, IMF officials want Chinese authorities to provide an update on the quantity of gold squirreled away inside China’s vaults. That news, when it’s released, will be a wake-up call to the world. It will underscore the degree to which sovereign governments outside America value gold, and it will send the price of gold higher as global investors and savers comprehend the ramifications of the number China ultimately reports. 3,510 tons of gold. That’s the estimate of China’s gold holdings that’s currently floating around the media. If that turns out to be the true figure, it would be more than three times the 1,054 tons of gold that China last reported officially in 2009. That whisper number, I believe, is much too light. Based on the quantity of gold China mines each year — it’s the world’s largest gold producer  and on the reported quantities of gold flowing into the country through Hong Kong and Switzerland, I calculate that China more realistically owns somewhere between 5,000 tons and possibly as much as 11,000 tons of gold. Such a quantity would shock the world … because, primarily, it would raise enormous questions about where China collected all this gold. China doesn’t mine enough to account for the spike. And the consumption of gold globally for jewelry and industrial uses takes up nearly 66% of global production, meaning that even if China bought every other ounce produced each year, that still would not account for the large increase in its holdings. No, some of the gold in China’s vaults would have to come from a very large seller of gold … and the only large seller would be another central bank. (Which one  and you know which one I’m talking about — is a subject for another day.) Instead, let’s stay focused on what China’s quantity of gold would mean to us directly…Golden Protection It would be a clear indication that China is establishing the yuan as a competitor to the dollar. Lots of Western commentators will laugh at that — a communist country with a reserve currency? They are so blinded by historical norms — the dollar’s reserve currency status for the last 70 years — that they fail to accept that history is ever-changing. The status quo is always in flux. It would also be a clear indication that gold isn’t an archaic form of currency. It’s a very modern currency, one that serves a very real and useful purpose today as disaster insurance. It’s just that it’s a form of currency that government cannot manipulate, which explains why U.S. monetary officials routinely pan the metal as essentially useless. The rest of the world doesn’t feel that way. They see gold as the financial asset that it has been for thousands of years …

which is why nations including Germany, Switzerland, Austria, Belgium, the Netherlands, France and others are repatriating (or looking to repatriate) their national gold held in the Federal Reserve and the Bank of England. China’s report to the IMF, when it comes, will be the next big event to highlight the importance of holding gold today. I say it all the time, but the message remains crucial to your financial well-being: Buy gold. Buy it often. Stash it away in whatever you deem the safe place (not a bank safe-deposit box). And sit patiently. The world is on the verge of a golden shock that will redefine global power … and likely send gold prices marching higher.