An Update — September 2026
This article is a follow-up to an article that was originally published in October of last year. At that time, Beijing’s strategic accumulation of commodities was still a gradual trend, and the World Bank was forecasting a global commodity price decline of 7 percent for 2026. Less than a year later, that forecast has been completely negated. The strategy described last year now looks less like diversification and more like a pre-emptive fortification of the Chinese industrial supply chain. For reference, the previous article is here.
From Oil Shock to Resource Squeeze
In October 2025, the consensus view was that commodities lagged inflation. Copper traded near $10,000/tonne and Goldman Sachs dismissed prices above $13,000 as a legacy artifact of early Trump tariff action.
Today, the world upon which those assumptions were based no longer exists. The World Bank now projects its overall commodity-price index to rise by about 16 percent in 2026. Within that figure, energy is expected to increase around 24 percent; fertilizer up over 31 percent; metals and minerals up in excess of 17 percent; precious metals more than 42 percent—with aluminium, copper and tin expected to reach record levels. This is no longer just a story about oil and gas; it is a broader, global, physical-resource squeeze.
According to S&P Global’s September Commodity Price Watch, what differentiates the current commodity squeeze from previous commodity super-cycles, is that this is “driven less by strong aggregate economic growth than by supply constraints, geopolitical disruption and concentrated demand from AI, electrification and defence”
Previously, commodity booms have been the product of strong aggregate demand driven by an increase in underlying economic growth. Today’s situation is different. What we are seeing is a global supply disruption driven by geopolitical fragmentation, the concentration of AI capital expenditure, constrained mining capacity, and higher shipping prices in spite of weak—faltering—aggregate demand. In short, we are moving into a far more inflationary configuration.
Some of the factors driving this shift have been caused directly by the US-Iran conflict, while others have been accelerated. The disruption to the Strait of Hormuz has not just hit energy, but aluminium, fertilizer and shipping. But the deeper drivers—mine supply stagnation, smelter competition, data-centre electricity demand—were already in place. The war has simply amplified them. However, from this new perspective, China’s strategy of stockpiling commodities looks less like cautious diversification and more like strategic foresight.
The Treasury Decade
For two decades, China’s current account surplus played an important role in shaping the world economy. In order to manage the exchange rate of the RMB against USD, the People’s Bank of China (PBoC) needed to absorb excess inflows by buying dollars and selling yuan. When a company buys products from a Chinese manufacturer the dollars go to the PBoC and the Bank then pays the Chinese producer in yuan at the managed rate. But this creates a problem for the bank: what to do with the dollar assets that end up on their balance sheet?
In the 2000s, the answer was simple: US Treasuries. With reserves in excess of $3 trillion this “Chimerica” arrangement, as it was called, seemed to suit both sides. For Beijing, Treasuries were liquid, safe and scalable. For Washington, Chinese demand suppressed yields, financing twin deficits at low cost.
But cracks began to form as Chinese policymakers worried about excessive exposure to a single counterparty as Washington’s debt burden grew. Additionally, Washington was increasingly signalling its willingness to use the global financial system to advance geopolitical ends. As trade, intellectual property and currency manipulation became pretexts, Beijing began to understand that relying exclusively on American paper was strategically risky.
The BRI Experiment
After 2013, the Belt and Road Initiative provided an alternative outlet. Policy banks recycled dollars into infrastructure loans across Asia, Africa and Latin America. The appeal was obvious: lending directly to developing economies put reserves to work, created demand for Chinese construction firms and products, and bought geopolitical goodwill. Ports in Pakistan, railways in Kenya, highways in Central Asia—all funded by China’s dollar surpluses.
But problems quickly emerged as many borrowers struggled with repayment. Debt renegotiations in Sri Lanka, Zambia and elsewhere left Beijing entangled in messy sovereign restructurings. It also provided ammunition to Western critics who quickly accused China of “debt-trap diplomacy.” A spurious accusation when the loans and repayment schedules were compared to the weight of World Bank and IMF loans on the same countries. Meanwhile, Chinese officials quietly complained about the poor returns. Lending dollars to fragile governments proved no more sustainable than lending them to Washington—just for different reasons.
A World of Sanctions
The West’s freezing of Russia’s reserves in 2022 marked a sea change in the global financial environment. Suddenly, losing access to your dollar assets was no longer a theoretical risk. The US Treasury could render them unusable by sanction instantaneously. Watching another great power and large surplus economy stripped of its savings by political fiat was sobering for Beijing. US debt ceiling theatrics and ballooning fiscal deficits deepened their unease.
If both Treasuries and BRI loans were problematic, what could absorb the steady inflow of surplus dollars?
The Turn to Metals
The answer, increasingly, has been commodities—specifically industrial metals. China has been accumulating copper, aluminium, nickel and zinc far beyond immediate industrial needs, managed by the State Reserve Bureau, state-owned firms and entities linked to local governments.
In this sense, metals serve a dual purpose. Financially, they are dollar-denominated stores of value that cannot be sanctioned when held domestically, and do not rely on the solvency of foreign governments. Strategically, they align with China’s industrial priorities: as the world—and China increasingly—electrifies, demand for copper, nickel and aluminium will surge. Stockpiling today ensures supply security tomorrow and provides leverage over global markets.
In effect, Beijing has created a parallel reserve system—much less liquid than Treasuries, but more tangible and politically insulated.
2026: The Thesis Validated
The decision looks vindicated. Where copper supply once seemed adequate, J.P. Morgan and UBS now project prices approaching $15,000 per tonne by the end of 2026. The World Bank expects its overall commodity index to rise 16% in 2026, with metals up 17%, fertilizer up 31% and precious metals up 42%.
The reason is not strong global growth but a supply disruption driven by geopolitical fragmentation, and concentrated demand from AI, electrification and defence. Smelters are now effectively paying to secure concentrate—a physical market starving for material, not a speculative bubble, according to the IEA. Gold is rising in parallel, with Goldman Sachs observing that central banks are buying at roughly triple their pre-2022 pace.
For Beijing, this a direct vindication of their strategy. The hard assets it quietly accumulated last year and before—copper, aluminium, gold—are precisely the assets now in short supply. What looked like cautious diversification in 2022 now looks very much like strategic foresight in 2026.
The RMB Zone’s Preemptive Fortification
Interpreting China’s stockpiling as simply “diversification’ is now clearly wrong. It’s clear Beijing was pre-emptively fortifying the RMB zone prior to a financial conflict. Copper warehouses and gold reserves are not merely stores of wealth—they are the hard-asset backing of a potential parallel monetary sphere.
According to the World Gold Council, the PBoC’s gold reserves reached approximately 2,387 tonnes in August 2026, marking the 22nd consecutive month of increases. But central bank purchases are only part of the story. China’s total gold imports through August exceeded 1,000 tonnes, surpassing all of 2025, with an import bill close to $158.8 billion. Since the PBoC accounts for only about 80 tonnes, most of this gold has been absorbed by commercial banks, ETFs and private investors—creating a “quasi-reserve” layer beyond official holdings.
In 2025, Beijing reclassified gold from a financial asset to a “strategic mineral.” Meanwhile, holdings of US Treasuries fell to $618 billion in July 2026, the lowest since 2008. The symmetry is obvious.
S&P Global Ratings framed this strategy as a means to “promote the yuan’s role in international trade.” The mechanics of which are already being built: the Shanghai Gold Exchange has launched an offshore gold delivery vault in Hong Kong, with yuan-denominated contracts settled through physical delivery. Further vaults are under consideration in Singapore, Dubai, Riyadh and Moscow.
The logic, as S&P analyst Charles Chang explained to the SCMP: “If you are trading in renminbi, there’s always a question as to how you are going to use the renminbi. But if that renminbi is convertible to gold, then that’s a potentially different picture.” Beijing is constructing an exit option for foreign RMB holders—a convertibility pathway that does not run through the dollar system.
This does not mean Beijing is thinking about a gold-pegged yuan. Beijing remains deeply sceptical of a formal gold anchor for numerous—and very good—reasons. A gold peg would impose unwanted fiscal discipline on Beijing, constraining the government’s ability to finance deficits through monetary expansion—unacceptable for an economy reliant on fiscal stimulus during deflationary pressures. It would also make the RMB’s managed exchange rate untenable by opening the door to asymmetric arbitrage: when gold rises, foreigners exchange gold for RMB; when it falls, they redeem RMB for gold. The exact dynamic that forced Nixon to close the gold window in 1971.
China’s strategy is therefore one of informal “backing” rather than “anchoring.” Gold enhances the RMB’s credibility without imposing a fixed exchange rate that would tie Beijing’s hands. An anchor is a constraint; a backing is a resource. Beijing wants the credibility that gold confers without the discipline it imposes. In short, creating a global gold market that functions in RMB makes holding the currency far more attractive in any future economic showdown. Such as a potential currency ambush.
But this strategy is not without risks. Metals are volatile and cannot be easily liquidated at scale. Nor has the BRI disappeared. China still extends loans, but with greater caution, emphasising “small and green” investments and quietly promoting yuan-denominated lending to reduce dollar exposure.
China’s surplus once subsidized the United States, now it insulates the Chinese economy against it. The dollars that used to fund US deficits or build railways in Kenya are now quietly underwriting an alternative to the dollar system. For Beijing, the lesson of two decades is clear: the safest place for its surpluses is not in American debt or Global South loans, but in hard assets it can physically control.