China Attacks the USA on All Fronts.
Try to see it from the hegemon’s point of view: While Russia confronts the USA head-on, China is attacking on almost every other front, simultaneously. China’s attacks look like neutral, ‘commonsense’ or ‘competitive’ moves. All nice and friendly:
- Like Shanghai’s new gold exchange. Shanghai forbids naked shorting; all sales are for physical delivery. Perfectly sensible, right? Well, it drives a wedge between the price of ‘paper’ (naked short) gold on US’ Comex and physical gold. This thwarts the world’s biggest paper gold shorter, the US Treasury, which has been using trillions in naked shorts to rig the market since the US failed to deliver gold that Germany had lodged with it for safe keeping.
- China’s offering Turkey financing and IP with their antimissile defense system. Turkey will be half out of NATO if it goes through with the deal – as it is threatening to do. Turkey is NATO’s Eastern wing.
- Then there’s the renminbi, which is internationalizing 10 times faster than anyone predicted. China’s controlling the world’s desire to diversify their reserves by bulking up on renminbi.
- If the past 50 years are a guide, the next financial crisis is due within 36 months.
You’ve got to feel sympathy for the hegemon, don’t you? I certainly do. My income is entirely tied to the $US. Maybe it’s time we thought of cooperating with the Chinese government, instead of treating it as an enemy. Maybe it’s too late.
With increased regulatory scrutiny on the London gold and silver fixings and what looks like a defensive attempt by the LBMA in London to protect their proprietary gold and silver price discovery auctions via the recently introduced CME/Thomson platform for silver and probably soon to be introduced similar CME platform for gold, it will be interesting to see how the Chinese government’s pro-gold strategy pans out.
We may soon see global gold hub wars between London and New York on the one hand and the increasingly powerful eastern hubs of Singapore, Shanghai and Beijing on the other.
China Gold Congress in Beijing
The China Gold Congress is currently in full flight in Beijing. The three day Congress is China’s biggest gold industry event of the year, drawing in participants from across the Chinese and international gold sectors including central banks, mining companies, bullion banks and refiners.
The event, co-sponsored by the World Gold Council (WGC) and the China Gold Association, showcases China’s gold industry and acts as a focus point for what is now the world’s largest gold market in terms of demand and product innovation.
Discussions and forums during the event cover everything from reserve asset management for the official or central banking sector, through to investment products and mining supply. One of the key themes this year is the internationalisation of the gold market.
China’s gold market accounts for one third of global demand, and according to the WGC, is expected to grow another 20% cumulatively from now until the end of 2017. In what is still a very centrally planned economy despite many market related reforms, nearly all reported gold activities in China flow through the Shanghai Gold Exchange (SGE) in one form or another.
Both the China Gold Association and the Shanghai Gold Exchange were established with government backing and their growth and success reflect a very deliberate pro-gold strategy on the part of the Chinese Government. Even though the China Gold Association is a non-for-profit member association, it still primarily acts as a conduit and coordination group between the government and the gold producers. The Shanghai Gold Exchange is the government’s second central hub in China’s gold market.
SGE approved refiners take in production from China’s fragmented gold mining industry and in imports from Hong Kong and other countries. The gold then flows through the Exchange after which SGE deliveries flow out to the banking sector, the official government sector, and additionally to the jewellery and technology industries.
The development of the Shanghai Futures Exchange also provides an additional venue for hedging and gold price discovery. In China gold is money and is accepted as such by the general population. There really does not seem to be a debate about this in Chinese government circles, and another part of the government’s strategy has been to advocate the increased innovative usage of gold by the Chinese banking sector.
China Attacks the USA!!