In a recent interview with Bloomberg, $BHP CEO says that Chinese steel mills have a utilization rate of 90% and are looking to produce over 1 billion tons of steel for the 5th year in a row. This is happening while China is undergoing a collapsing real estate sector and other areas of the world are demanding less steel due to slowing construction and manufacturing activity.

Where is all the steel going if it's not going to other countries? Is it going to the military factories?

According to The Drive, China has 200 times greater shipbuilding capacity than the US. When looking through the internet, China continues to create and deploy more warships every year. At the same time, China is producing weapons for Russia to aid in the Russian invasion of Ukraine. With all that steel being produced and the main consumer of steel, the real estate sector, in collapse, where is all the steel going?

My assumption: China is preparing for war.

The country is already stockpiling on energy, food, gold, and simultaneously selling its US treasury holdings. While Russia didn't need to horde food because it's self-sufficient with food production, it did sell 84% of its US treasuries in 2018 and started holding more gold than dollars in 2021.

Other signs of China preparing for war include its increased frequency of military drills around Taiwan, the passing of an anti-espionage law that expands the government’s power to punish apparent threats to national security, and the doubling of the number of licensed bonded marine fuel dealers since 2020. Within the Chinese government, dictator Xi Jinping removed Rocket Force commander, Li Yuchao, and its political commissar, Xu Zhongbo and replaced them with loyalists from the navy and air force. Those people being placed in charge of Rocket Force have no experience with land-based ballistic and cruise missiles, which speaks a lot about the dangerous shifts happening in China's military leadership.

As China embarks on a long trend of reducing its transparency on the economy, some will say that this move is made to train the Chinese economy to become less dependent on foreign investors and businesses. But there's more to that than meets the eye. One of the statistics that China is looking to stop reporting is youth unemployment. By not reporting that number, China can obscure vulnerabilities within its economy. As CCP media touts record enrollment in the military, not reporting the youth unemployment numbers can help obscure how big the youth enrollment into the military looks like.

In summary, as the global economy slows and China's factories continue to perform at higher utilization rates than other factories around the world, instead of seeing China as a bright spot for global business, question those activities. As China's window of opportunity for invading Taiwan narrows, the actions that we are seeing China do both on the global stage and domestically will look more desperate and concerning.