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

China is buying up gold at record rates in a move experts claim could mean it is preparing to safeguard its economy against Western sanctions ahead of a possible invasion of Taiwan. 

The Central Bank launched its gold-buying spree in October 2022, accumulating hundreds of tonnes of the precious metal in the past 18 months. 

A World Gold Council report said China now holds a stunning 2,262 tonnes of gold worth roughly $170.4 billion (£135 billion) - and Beijing in the meantime has offloaded more than $400 billion worth of US Treasury 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 the historically stable asset while dropping huge amounts of US debt has led analysts to suggest China is seeking to reduce its dependency on the American dollar, which in turn would mitigate the impact of any Western-imposed economic sanctions. 

It comes as tensions with Taiwan, the Philippines and other US allies in the South China Sea continue to escalate, with Chinese military aircraft routinely embarking on threatening sorties toward the island. 

Taiwan on Saturday reported renewed Chinese military activity near the island, with 12 aircraft crossing the sensitive median 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 in recent months faced increased military pressure from China, which views the island as its own territory. 

Taiwan's defence ministry said that from 9:30am (0130 GMT) on Saturday it had detected 22 Chinese military aircraft, including Su-30 fighters, of which 12 had crossed the median line to Taiwan's north and centre.

The line once served as an unofficial border between the two sides over which neither sides' military crossed, but China's air force now regularly sends aircraft over it. 

China says it does not recognise the line's existence, and President Xi Jinping has openly stated his desire to 'reunify' Taiwan with the mainland, by force if necessary.

Jonathan Eyal, associate director at the Royal United Services Institute (RUSI) think-tank, said of China's gold strategy: 'The relentless purchases and the sheer quantity are clear signs that this is a political project which is prioritised by the leadership in Beijing because of what they see is a looming confrontation with the United States.

'Of course it's connected also to plans for a military invasion of Taiwan,' he told The Telegraph. 

He went on to speculate that China's move to diversify its investments and dump US debt was sparked by the Russian invasion of Ukraine and the resulting torrent of Western sanctions levied against Moscow.

More than $300 billion worth of Russian assets were frozen in Europe and the US - a huge financial blow as the Kremlin seeks to finance its ongoing war. 

John Reade, chief market strategist at the World Gold Council, told the FT that the sanctions against Russia's central bank sparked a flurry of gold-buying amid non-Western aligned countries and 'caused many non-aligned central banks to reconsider where they should hold their international reserves'. 

He added: 'Countries have recognised that the gold that Russia holds, because it's outside of anybody else's control, is useful in situations where you might not be able to access any other reserves.'

China's relationship with the West, particularly its grand rival the United States, is rocky to say the least.

China's threatening rhetoric toward Taiwan and increased tensions in the South China Sea with US allies in the region, particularly the Philippines, is just one of several points of contention between Beijing and Washington.

US Secretary of State Blinken's terse visit to Beijing was emblematic of the wider relationship, with the diplomat and his Chinese counterpart voicing a desire to improve ties but each delivering warnings over the possibility of a breakdown. 

'Overall, the China-U.S. relationship is beginning to stabilise,' China's Foreign Minister Wang Yi told Blinken at the start of a long day of talks last week.

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

'Should China and the United States keep to the right direction of moving forward with stability or return to a downward spiral?' he asked rhetorically. 

The minister went on to outline a number of grievances held in Beijing about what it feels are meddling US policies and positions on the South China Sea, Taiwan, human rights and China's right to conduct relations with countries it deems fit. 

'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 hold China's development back, and not to step on China's red lines on China's sovereignty, security, and development interests.'

Blinken in turn warned Yi that China faces US sanctions if it keeps boosting Russia's weapons industry - a charge Beijing refutes.

Though China has not directly exported weapons to Russia, the US believes Beijing is supplying Moscow with a range of vital materials for military hardware, from components for cruise missile engines to the ceramics used in body armour.