Free The Death of Money by James Rickards Page B

being
     a net buyer. The
Times
report found this selling strange because China was still accumulating huge dollar
     reserves from its trade surpluses and was still buying dollars to manipulate the value
     of its currency. The implication was that China must still be a large buyer of Treasuries,
     even though official data showed otherwise. The
Times
noted that in 2010 Britain had emerged as the world’s largest purchaser of Treasury
     securities, and it inferred that China had “shifted purchases to accounts managed
     by British money managers.” In effect, China was using London bankers as a front operation
     to continue buying U.S. Treasury notes while Beijing officially reported that it was
     selling.
    Another technique China uses to disguise its market intelligence operations was reported
     on May 20, 2007, in
The New York Times
when
Andrew Ross Sorkin disclosed that theChina Investment Corporation (CIC), another sovereign wealth fund, had agreed to purchase
     $3 billion of stock in Blackstone Group, the powerful and secretive U.S.-based private
     equity firm.
    Blackstone Group was cofounded by former Nixon administration senior official Peter
     G. Peterson, later chairman of both the Council on Foreign Relations and the Federal
     Reserve Bank of New York. The other Blackstone cofounder, Stephen A. Schwarzman, is
     a multibillionaire who becamenotorious for his sixtieth birthday party held at the New YorkPark Avenue Armory on February 13, 2007, just a few months before Blackstone’s sale.
     That party included a thirty-minute performance by Rod Stewart, for which the singer
     was reportedly paid $1 million. China was now buying its own front-row seat at the
     Blackstone party, gaining access to top management and the ability to coinvest in
     pending deals.
    In June 2007, shortly before global capital markets began the collapse that culminated
     in the Panic of 2008, Schwarzman described his deal-making style: “I want war, not a series of skirmishes. . . . I always think about what will kill
     off the other bidder.” He was referring to conventional finance; real war was the
     furthest thing from his mind. Yet he was already a pawn in a financial war greater
     in scope than his blinkered perspective allowed him to see. Self-styled global citizens
     like Schwarzman, who treat New York as a pit stop in their travels from Davos to Dalian,
     may think real war is a thing of the past, even obsolete. Similar views were advanced
     in the late 1920s, even as events were moving toward the greatest war in history.
    Analysts praised the fact that the CIC-Blackstone deal showed that China was willing
     “to put its vast reserves to work outside of China.” But this emphasis on the outbound
     money flow ignores the inbound flow of information. It is naïve not to consider that
     information on America’s most powerful deal machine’s inner workings is being channeled
     to the political bureaus of the Communist Party of China. The Chinese investment due
     diligence teams get a look at confidential deal target information, even on deals
     that do not ultimately get done. The $3 billion sale price may seem like a lot of
     money to Schwarzman, but it is only one-tenth of one percent of China’s reserves,
     the equivalent of dropping a dime when you have a hundred-dollar bill. China’s penetration
     of Schwarzman and Blackstone is a significant step in its advance toward East Asian
     hegemony and a possible confrontation with the United States. Of course, information
     channels are a two-way street, and firms such as Blackstone do assist the U.S. intelligence
     community with insights on Chinese capabilities and intentions.
    The United States is not the only potential Chinese financial warfare target. In September
     2012 a senior Chinese official, writing in the Communist
China Daily,
suggested mounting an attack on the Japanese bond market in retaliation for Japanese
     provocations involving disputed island territories in