HMM: China May Be Preparing to Deploy Economic ‘Nuclear Option.’

“China is preparing for something major. That seems increasingly obvious judging from the stockpiling of important resources. Could it be that they are preparing a major one-off devaluation of the CNY?” Andreas Steno Larsen, CEO of Steno Research, wrote last week.

Currency devaluation is widely described as a “nuclear option” by economists due to the serious global repercussions it could trigger.

By intentionally devaluing the yuan, for instance, China could boost exports by making its goods cheaper and more competitive—but not without serious repercussions such as riling trade partners and worsening the country’s trade war with the United States.

Accumulating resources like gold and oil beforehand could provide some financial security and bargaining power, helping to stabilize the economy against potential negative effects of a devaluation, such as increased import costs and inflation.

China’s central bank continued its gold-buying tear in March, boosting its reserves of the metal for the 17th straight month, in spite of the metal’s record-high price and a weak yuan.

An escalating trade war seems likeliest but they’d be making similar preparations for a shooting war.