China is buying a huge stockpile of gold worth £135 billion, raising fears that Beijing is preparing to invade Taiwan and protect its economy in the event of Western sanctions

China is buying gold at a record pace. Experts say China is preparing to protect its economy from Western sanctions ahead of a possible invasion of Taiwan.

The Central Bank launched its gold purchases in October 2022 and collected hundreds of tons of the precious metal over the past 18 months.

According to a report from the World Gold Council, China now owns a staggering 2,262 tonnes of gold worth around $170.4 billion (£135 billion) – and Beijing has since canceled more than $400 billion in US government bonds since 2021.

There is also speculation that China holds significantly more gold reserves than the officially announced total.

The concerted effort to invest in its historically stable assets while reducing massive amounts of U.S. debt has led analysts to suggest that China wants to reduce its dependence on the U.S. dollar, which in turn will reduce the impact of any possible by the West imposed economic sanctions.

It comes as tensions with Taiwan, the Philippines and other US allies continue to escalate in the South China Sea, with Chinese military aircraft routinely making menacing flights to the island.

Taiwan reported renewed Chinese military activity near the island on Saturday, with 12 aircraft crossing the sensitive center line of the Taiwan Strait, just one day after US Secretary of State Antony Blinken left Beijing following a tense diplomatic visit.

The democratically governed island has faced increasing military pressure in recent months from China, which considers the island its own territory.

Taiwan’s Defense Ministry said it had detected 22 Chinese military aircraft, including Su-30 fighters, as of 9:30 a.m. (01:30 GMT) on Saturday, 12 of which had crossed the center line into northern and central Taiwan.

The line once served as an unofficial border between the two sides that neither side’s military could cross, but the Chinese air force now regularly sends planes over it.

China says it does not recognize the line’s existence, and President Xi Jinping has openly expressed his desire to “reunify” Taiwan with the mainland, by force if necessary.

Jonathan Eyal, associate director at think tank Royal United Services Institute (RUSI), said of China’s gold strategy: “The ruthless purchases and the sheer quantity are clear signs that this is a political project being prioritized by Beijing’s leaders because of what they see is an impending confrontation with the United States.

“Of course it is also related to plans for a military invasion of Taiwan,” he said The Telegraph.

He further speculated that China’s move to diversify its investments and dump U.S. debt was fueled by Russia’s invasion of Ukraine and the resulting flood of Western sanctions on Moscow.

More than $300 billion of Russian assets have been frozen in Europe and the US – a huge financial blow as the Kremlin tries to finance its ongoing war.

John Reade, chief market strategist at the World Gold Council, told the FT that sanctions on Russia’s central bank triggered a wave of gold buying among non-Western countries and “caused many non-Western countries to reconsider where to hold their international reserves.”

He added: “Countries have recognized that the gold that Russia has, because it is beyond anyone else’s control, is useful in situations where you may not have access to other reserves.”

China’s relationship with the West, and especially with its great rival the United States, is shaky at best.

China’s threatening rhetoric toward Taiwan and increased tensions in the South China Sea with U.S. allies in the region, especially the Philippines, are just one of many points of contention between Beijing and Washington.

US Secretary of State Blinken’s brief visit to Beijing was emblematic of the broader relationship, with the diplomat and his Chinese counterpart expressing a desire to improve ties but both warning of the possibility of a rift.

“On the whole, the China-US relationship is beginning to stabilize,” Chinese Foreign Minister Wang Yi told Blinken last week at the start of a long day of talks.

‘But at the same time, the negative factors in the relationship are still increasing and increasing and the relationship is facing all kinds of disruptions.

“Should China and the United States continue to move in the right direction and make progress toward stability, or return to a downward spiral?” he asked rhetorically.

The minister then outlined a number of grievances expressed in Beijing over what he said are US policies and positions on the South China Sea, Taiwan, human rights and China’s right to have relations with countries it deems appropriate , stands in the way.

“China’s legitimate development rights have been unreasonably suppressed and our core interests are facing challenges,” he said.

“China’s concerns are consistent. We urge the United States not to interfere in China’s internal affairs, not to obstruct China’s development, and not to cross China’s red lines on China’s sovereignty, security and development interests.”

Blinken, in turn, warned Yi that China would face U.S. sanctions if it continues to boost Russia’s arms industry — an accusation Beijing refutes.

Although China has not directly exported weapons to Russia, the US believes Beijing supplies Moscow with a range of essential materials for military hardware, from parts for cruise missile engines to ceramics used in body armor.